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Competing in Global Markets
Group 3Vijay Madanu – 17Ankur Rathi – 37Vishal Roge – 38Sachin Shah – 42
Deepak Singh – 47Nikhil Thadani - 52
Structure
• Globalization Factors - Overview
• Global Strategic Models – Porter & Yip
• Blue Ocean and Red Ocean Strategy
• Case Analysis
Forces driving global integration
• Globalization of Economies – Emerging markets• Fierce local competition• Syndication of Technology – Manufacturing Efficiency• Trade pacts and bilateral ties between economies• Conducive business / monetary policies promoting
international trade• Growing literacy rate• Rise in Per capita income
Industry Globalization Drivers
• Market Drivers– Common Customer Needs– Global Customers & Channels– Marketing Mix
• Cost Drivers– Global Economies of Scale & Scope– Steep Learning & Experience Curve Effects– Favorable Logistics– Shortening PLC, Rising R&D & Development Costs– Fast Changing Technology
Industry Globalization Drivers
• Government Drivers– Favorable Trade Policies– Compatible Technical Standards– Common Marketing Regulations– Government as a Customer
• Competitive Drivers– Presence of Global Competitors– Presence of Strong Local Competitors
Issues Faced…
• Government intervention• Infrastructure bottlenecks• Legal environment• Financial Regulations• Civil Disturbances• Environmental Issues
Advantages of going Global
• Scalability – production, sourcing, R&D
• Learning from different markets
• Marketing and Distribution
• Investor / Consumer Confidence
Challenge
• Converting global advantage in to local advantage
• Enriching experience from local markets to global scale
Essentials of competing in global markets
• Effectively managing change and transition• Cultural diversity• Design flexible organizational structures• Compliances – Environment, Safety
Key Elements for International Competition
• Competitive Advantage– The set of unique features of
a company and its products that are perceived by the target market as significant and superior to the competition.
• Sustainable Competitive Advantage– An advantage that cannot be copied by the competition
International Strategy
• An International Strategy is a strategy through which the firm sells its goods or services outside its domestic market.
• Reasons for implementing an international strategy– International markets yield potential new opportunities– To extend a product life cycle– To secure needed resources
Opportunities and Outcomes of International Strategy
Increased Market Size
Return on Investment
Economies of Scale and Learning
Advantage in Location
International Business –level
Strategy
Multi-domestic Strategy
Global Strategy
Transnational Strategy
Exporting
Licensing
Strategic Alliances
Acquisitions
Establishment of a new subsidary
Management Problems and
Risk
Better Performance
Innovation
Management Problems and
Risk
Identify International Opportunities
Strategic Competitiveness Outcomes
Explore Resources
& Capabilities
Use of Core Competenc
eModes of
Entry
International Strategies
• International Business-Level Strategy– Global cost leadership– Global differentiation– Global segmentation
• International Corporate-Level Strategy– Global strategy– Multi-domestic strategy– Transnational strategy
International Business-Level Strategy
• Global cost leadership– focuses on being the lowest cost producer of a product globally– Takes advantage of global economies of scale & high volume sales
world-wide– Eg: Walmart
• Global differentiation– Create a superior product or change customer perception of the
product in order to raise price on a global scale– Often the basis of this strategy is a strong brand name– Eg: Apple
• Global segmentation– Global version of a focused strategy– Can be either be global cost leadership or global differentiation– Targets a single segment on a worldwide basis– Eg. Zara
Multidomestic Strategy
Transnational StrategyGlobal Strategy
LOW HIGH
LOW
HIG
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Need for Local Responsiveness
International Corporate-Level Strategy
• Global strategy– Firm offers standardized products across country markets, with
competitive strategy being dictated by the head office– Emphasizes economies of scale– Less responsive to local markets– Eg Coke, Pepsi
• Multi-domestic strategy– Strategic and operating decisions are decentralized to the strategic
business unit in each country– Maximizes local responsiveness– Eg. Unilever, P&G
• Transnational strategy– Firm seeks to achieve both global efficiency and local responsiveness– Eg. Dell
Modes of Entry
Types of Entry CharacteristicsExporting High cost, low controlLicensing Low cost, low risk, little control, low returns
Strategic alliances Shared costs, shared resources, shared risks, problems of integration
AcquisitionQuick access to new market, high cost, complex negotiations, problems of merging with domestic operations
Wholly owned subsidiary
Complex, often costly, time consuming, high risk, maximum control, potential above-average returns
Strategic Competitiveness Outcomes
• International Diversification and returns– Greater economies of scale and learning along
with greater innovation, help produce above-average returns.
• International Diversification and innovation– Provides larger market to gain more and faster
returns from investments in innovation– May generate resources necessary to sustain a
large-scale R&D program
Risks in International Environment
• Political risk– Domestic instability– Foreign conflict– Protectionism: Tariff, Quota, Subsidy, Cartel– Corruption: Bribery, Extortion, Grease payments
• Economic risk
Porter and Multidomesticity
• According to Porter, a company is:– Multidomestic if competition in each nation is
independent– Global if the competition is global
Basis of Global Strategies: 2 Models
• Porter’s • Yip’s
Porter’s Global Generic Strategies
• Protected markets• National responsiveness• Global cost leadership• Global differentiation• Global segmentation
Protected Markets
• Focusing on competing in countries where that particular government protects or favors the business
National Responsiveness
• Focuses on adapting strategy to each local market
Red and Blue Ocean Strategy
• Create uncontested market space• Make the competition irrelevant• Create and capture demand• Break the value – cost trade off• Align the whole system of firms activities with its strategic choice of
differentiation and cost
Blue Ocean Strategy
• Complete in existing market space• Beat the competition• Exploit existing demand• Make the value-cost trade off• Align the whole system of firms activities with its strategic choice of
differentiation or cost
Red Ocean Strategy
•Which factors industry takes for granted that should be eliminated
Eliminate
•Which factors should be reduced well below the industry’s standard
Reduce
•Which factors should be raised well above the industry standard
Raise
•Which factors should be created that the industry has never offered
Create
Four Action Framework
Formulation Principles•Reconstruct market boundaries•Focus on big picture and not numbers•Reach beyond existing demand•Get the strategic sequence right
Execution Principles• Overcome key organizational
hurdles• Build execution in to strategy
6 principles of Blue Ocean Strategy
Case Analysis
MTV v/s Channel V
Case Overview
• Entered in India via STAR’s satellite feed in 1991• Rupert Murdoch acquired STAR in 1993 and MTV parted ways
over some commercial disagreements.• This led to launch of Channel V• MTV launched again in 1995 – focused on youth and common
brand image• Stiff competition on distribution figures• While MTV had a upper hand in attracting advertisers and
revenue, Channel V was better off recovering cost by low and smart investment
Launch Approach
• MTV wasn’t adopting product to local tastes and requirements – Global approach
• Channel V on other hand went for localization with artists and programming– VJ’s– Local Artists
Strategic Approach
• MTV – Multidomestic– Localized content but certain common values that projected the brand
in a certain form for consumers ‘MTV Generation’– Positioning – Music Channel– Global Network
• Channel V - National Responsiveness Strategy– Total localization, positioned themselves differently in each market – Changed Positioning in 1999 – Positioned as a youth channel– Regional network
India• MTV
– Focused on roadshows and Dance parties– Music entertainment– Mass base
• Channel V – Operational liberty (National Responsive Strategy) – International Content and music– Focused on classes– Coke V Live Concert, Music awards with local, national and
international artists– 10 concerts in two years (97-98)– Long term advertising deals
China
• MTV– Televised Award ceremonies were very important– MTV announced Music Honours in association with CCTV –
days before Channel V planned event– Lack of procedural clearances delayed the project by 3
months
• Channel V– Successful music awards even that got 500 million viewers
across Asia / 3 million votes across 20 categories
Strategy – reach and distribution
• MTV – Concentrated on Syndication / Fixed slot and
claimed more reach amongst the TG
• Channel V– Focused on 24 hour relay of channel through
satellite and cable – Illegal satellite and cable made it difficult for ad
sales
Going beyond
• With advertising and reach being limited it was necessary for both the channels to move out and compete beyond television audiences
– Syndication– Licensing– Merchandising– Royalties
Licensing and Merchandising
• MTV - Global– Globally recognized brand and logo helped in creating tailor made
music eg. Unplugged series, MTV Alternate Nation etc– Branded Merchandise like clothing, books, backpacks etc– MTV branded Pagers– Different pricing for different markets – eg. Philippines and Singapore– Scores heavily on brand perception over Channel V
• Channel V – India– Albums & T-shirts – more for promotion– Kazakhstan – Deal with ALMA TV for beaming it to 50000 homes– Poor logo – Lack of brand equity as compared to MTV
Others
• Better operations to reduce over head costs – Channel V overhauled their system to Digital and increased efficiency
• MTV launched website with Tricast Ltd– Allowing video, audio downloads and news updates– Chinese Version– Plans to monetize inventory– Sell merchandise– Collect more TG data for sales support– 4 times the traffic of Channel V– Live Webcast – Billboard Asian Music conference