Transcript
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INTERNATIONAL BUSINESS
STRATEGY
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Multidomestic
Transnational or
Global Strategy?
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Multidomestic
“is an organisation with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences”
(Source: International Business, The Challenge of Global Competition)
• Operates in different countries but – Products, Manufacturing Process and Business Strategy are adjusted to suit the local conditions.
• Polycentric Orientation – must adapt to succeed.
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Multidomestic
• Differences in the various market places.
• Markets demand different strategies.
• Different Products• Different Marketing• Different Processes
• Also called Multinational
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Transnational
• The term Transnational and Multinational are now used synonymously.
• 1970’s and 1980’s the U.N. when studying the impact of ‘TNC’s’ found:
“considerable complexity” in defining Transnational corporations.
• “Agreement on a specialised definition was never achieved”
(Source: United Nations Conference on Trade and Development, www.unctad.org)
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Transnational
“corporation comprising parent enterprises and their foreign affiliates”
(Source: International Business, The Challenge of Global Competition)
• Combination of MDC and Global Company
Highly responsive to local Globalise Functions
Conditions
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Transnational
• Merger of two firms from different countries
Example:
Unilever (Dutch – English Food)
Shell (Dutch – English Oil)
• Might also be called “Binational”
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Transnational - Example
• Royal Dutch / Shell
• Binational Dutch – British Heritage• Headquarters – The Hague and London• “National operating company has significant autonomy”• “a distinctive global culture”
(Source: Managing the Multinational, Humes, Samuel, 1993)
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Global
• An Overused and Misused term
• A Global organisation attempts to:
1. Have a Worldwide Presence
2. Standardise its operations Worldwide (1 function at least)
3. Integrate its operations Worldwide
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Global
• Assumption:Customers around the world are similar.
• Geocentric Orientation – markets are similar and it is possible to have a global strategy that transcends local differences.
• Worldwide Standardisation in: - Marketing - Technical Functions - Production
• Production Plants located around the World
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Global
• What is a Global Firm not?
1. Borderless
2. Stateless
“Each country has a home government and tax authority”
(Source: International Business, The Challenge of Global Competition)
Also most are owned by shareholders from one nation.
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Factors to consider when deciding on
International Strategy(Source: Strategic Marketing Management, Lambin, Jean-Jacques, McGraw Hill, England, 1997)
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SEGMENTATION
• Potential customers with similar buying behaviour.
• Approaches:
1. Identify Clusters of Countries
2. Identify Segments that exist in many/most countries
3. Different Segments/Different Countries/Same Product
• Segment
Group of Countries
Group of Customers
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Competitive Advantage
FIRM STRATEGY,
STRUCTURE, RIVALRY
FACTOR DEMANDCONDITIONS CONDITIONS
RELATED AND SUPPORTING INDUSTRIES
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Competitive AdvantageForces Driving Competition
Potential Entrants
Industry
Competitors rivalry amongst existing firms
Suppliers Customers
Substitutes
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Communication - Advertising
2 Approaches
Standardised Localised
Consumers have Cultural Empathy
same needs/wants Required
Universal Individual
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Communication – AdvertisingAlternative Strategies
1. Brand Globally and Advertise Globally - standardise both brand and advertising - global forces strong / local forces weak
2. Brand Globally but Advertise Locally - standardise brand but localise advertising - both global and local forces are strong
3. Brand Locally and Harmonise Advertising Locally - standardise advertising but localise brand - focus on brand value / name doesn’t matter
4. Brand Locally and Advertise Locally - local forces strong / global forces weak
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EXAMPLES
1. Brand Globally and Advertise Globally?
2. Brand Globally but Advertise Locally?
3. Brand Locally and Harmonise Advertising Locally?
4. Brand Locally and Advertise Locally?
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Going International FactorsSummary
• ‘Controllable’s’
• Cost • Price• Advertising• Distribution
• ‘Uncontrollable's’
• Political• Economic• Social• Technological• Demographics• Legal Factors• Competition• International Trade
Agreements
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Multidomestic, Transnational or Global?
The Best Commercial Approach
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Benefits of going International
• Reduced costs through moving production to lower cost countries
• Increase company size through Merger and Acquisition = economies of scale
• Increase sales by opening up new markets = economies for the manufacturing system
• Question is: Global or Multidomestic (Transnational)
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The extent of Globalisation as a Strategy
• Seven Global Dimensions(Source: International Business, Ball et al.)* dimensions that can be standardised – from MDC to
Globalised or in between. 1. Product 2. Markets3. Promotion4. Where value is added to the product (F.A.B.)5. Competitive Strategy6. Use of non-home country personal7. Extent of Global ownership of the firm
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To what extent can you Globalise (Standardise)?
‘Seven Dimensions’
Full Global Strategy
Scale
Transnational
Multidomestic
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To what extent can you Globalise (Standardise)?
• Product• Segment Markets• Promotion• Where value is added• Competitive Strategy• Non-Home country
personal• Extent of Global
ownership
e.g. Coca Cola e.g. Teenagers
Advertising Limitations Features / Benefits
‘Uncontrollable’s’ Employ local people
Normally have at least an equity stake
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Example – Limitations on Global Advertising
• Language – interpretation / use of foreign words• Media Availability – Regulation / Viewing Habits• Legal Considerations – Alcohol, Allowed in Sweden,
Limited in Ireland, Banned in Belgium• Symbols • Colours• Family Structure• Consumer Habits – Orange Juice for Breakfast?• Social Roles – Middle East, Shopping always done by
women(Source: Strategic Marketing Management, Lambin, Jean-Jacques)
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Conclusion
Why fight over it?• A Global company meets these criteria:
- Worldwide Presence
- Standardised operations
- Integrated operations
- Culturally diverse
- Production worldwide
- Allows free flow of people – “multicultural multinational”
- Exploits its technologies worldwide• It still must – be responsive to its local customers if only for cultural
reasons• Does this mean it cannot be a Global company?
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Example – Proctor & Gamble
Head & Shoulders - Oil of Ulay – Ariel - Pampers
• 1837 – Cincinnati, Ohio• 1933 – England• 1940 – Cuba, Philippines, Indonesia• 1963 – Brussels, European Technical Centre
R&D, Purchasing, Engineering, Manufacturing• 1983 – Japan• Since 1983 – Acquisitions• 25 person Board with 8 non-Americans
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Example – Proctor & Gamble
• Edwin L. Artzt, CEO;
• “manage our brands locally”• “these are world brands, with appropriate regional
tailoring of product aesthetics and form”• “whatever it takes to best satisfy local consumer demand
for quality and value”(Source: Managing the Multinational, Humes, Samuel,
Prentice Hall, 1993)• Example: ‘Wash & Go’ – sold in 60 countries under 6
different brand names.
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Sources
International Business, The Challenge of GlobalCompetition, Ball, Donald A., Mc Culloch, Wendell H.,Frantz, Paul L., Geringer, J. Michael, Minor, Michael S., McGraw Hill, New York, 2004
Strategic Marketing Management, Lambin, Jean-Jacques,Mc Graw Hill, London, 1997
Managing the Multinational, Confronting the Global – LocalDilemma, Humes, Samuel, Prentice Hall International,London, 1993
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