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Global Companies:

Spread Value Chain across the world

Source raw materials where ever cheapest, move to

countries where cost of factors of production is

lowest & finally send to most affluent markets.eg

Sony,GM,Auto/Truck Cos,P&G

Major revenue from global mkts, spread of Equity around

the world.

Focus more on standard products,mass customisation Trans national Companies (new coinage)

Global in operations but tend to be more responsive.

Think Global , Act Local

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Evolution of Global business:

International firm-Exporting products from home base ,overseas.

Large scale import of raw materials for home consumption

eg M&M exporting tractors to USA, Tata-trucks

Multinational firm (MNC)Large scale setting of production(distribution) facilities abroad

Substantial revenues from overseas operations.

eg Oil Cos-BP,Mobil-. Exploration,refining,distribution

Unilever,Philips

Multi Domestic Cos- MNCs operating more like national Coseg

Hindusthan Unilever,ITC(Tobacco,Paper,Hotels,Life style, Agrowhile parent

BAT focussed only on Tobacco). These Cos while drawingTechnology,Mkt support for practical purposes work independently

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Cultural Diversity & the Organisation:

Hofestede Model - Power- Distance,Individualism vs Collectivism,

Masculanity-Feminism, UncertainityAvoidance

Halls classification- Low/High Context Cultures

Managerial Staffing - Ethnocentric(homebias),Geocentric(local/regional)

Poly centric(whichever best) approaches

Industrial Relations - Socialist,communist trade unions anti MNC s

MNCs exploit Labor,MNCS hand in glove

with the Govt Expatriates - Cost 3to4 times home pay-foreign

allowance, double establishment,childrenschooling, working wives reluctance toshift. Ideal tenure3to4years

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Differences in Financial,Accounting,Taxation ,Legal systems in

countries of operations

Taxation uncertainities(eg GAAR-Vodofone)

Stricter Enforcement(eg USA-Insider Trading)

Operating profit/Capital repatriation issues Managing Currency fluctuations:

Transactional/translational (A/C)Exposures

Hedging.MNCs equalise revenues in

TRIAD(N.America,Europe,Asia Pacific with equal GDP)

Netting( Internal or thru Banking arrangements)

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Product

Standardisation Vs Adaptation- a balancing act (eg industrial items Gillette ,computers,Playstation,cannon cameras , Applle I Podvs packaged products(food,detergents etc ) vs services)

Standardisaion gives Economy of scale,better positioning,advt.

Adaptation -New Zealand Diary adds,ginger,pappya flavor to milk in China

-TV channels adopt sub titling,Google-multi script,Simpson US Serial Samshoor in SaudiArabia

-Unilever reduces salt,fat,sugar in health conscious countries

-GmM offers Cadillac/Saturn for North America,Europe(Opel,Vauxhall,China Buick

Legal requirements Product information, product safety (eg FDA in USA),product liability,environmental issues,IPR

Mkt. Segmentation (dividing mkts into homogeneous clusters, looking for similar customer value curves ,californisation ofmkts,Levis,MTV target youth who follow global media)-US firms focus on LatinAmerica,with common Spanish language,cultural heritage

Product Introduction- cascading (saturate Affluent mkts first& laterenter low cost emerging mkts) vssprinkler approach ie simultaneous launch of new products(I_Pad)

Pricing

cost plus(affluent mkts like Japan for US Premium goods), mkt competitive price,incrementalpricing,below cost (attractDumping duties-WTO). Inter Division transfer pricing-Arms Length Principle

Differential pricing across neighbouring countries can lead to grey Mkts

Location of value adding facilities in Free trade blocks can reduce duties.

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ProductStandardisation Vs Adaptation- a balancing act (eg industrial

items Gillette ,computers,Play station,cannon cameras , ApplleI Podvs packaged products(food,detergents etc ) vs services)

Standardisaion gives Economy of scale,better positioning,advt.

Adaptation -New Zealand Diary adds,ginger,pappya flavor tomilk in China

-TV channels adopt sub titling,Google-multiscript,Simpson US Serial, Samshoor in Saudi Arabia

-Unilever reduces salt,fat,sugar in healthconscious countries

-GmM offers Cadillac/Saturn for NorthAmerica,Europe(Opel,Vauxhall,China Buick

Legal requirements Product information, product safety (egFDA in USA),product liability ,environmentalissues,IPR

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Mkt. Segmentation (dividing mkts into

homogeneous clusters, looking for similar

customer value curves , californisation of

mkts,Levis,MTV target youth who followglobal media)-US firms focus on Latin

America,with common Spanish

language,cultural heritage

Product Introduction- cascading (saturateAffluent mkts first& later enter low cost

emerging mkts) vs sprinkler approach ie

simultaneous launch of new products(I_Pad)

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Global Branding & Product Devolopment

Global branding, a global positioning strategy-eg cococola, Pepsi,IBM,GE,Sony,Honda-provides a sense oftrust&confidence in purchase decisions. Brands bring Loyalty,higher premium prices by increasing leveragewith

distributors,customers(Brand Value Coco Cola-67.5 Billion USDollars,Micro soft-60,Nokia26,Toyota24,Sony 10.

It is not possible to followone offering-One worldstrategy-eg Fords world carMondeo failed to get acceptanceof mkts,regulatory authorities.

On the contrary,Ever ready Battery consolidated nationalbrands-Ucar,Wonder,Mazda into Energizer. While managersprefer to build a national brand first&theninternationalise,,the preferred approach is to build Globalbrand in the first stage itself.

Toyota,Honda buld Accord,Corrolla on standard platforms

wiyth Modular approach, GM standardising some bestplatforms from its subsidaries. Ose of Global teams for

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ProductStandardisation Vs Adaptation- a balancing act (eg industrial items Gillette ,computers,Play

station,cannon cameras , Applle I Podvs packaged products(food,detergents etc ) vs services)

Standardisaion gives Economy of scale,better positioning,advt.

Adaptation -New Zealand Diary adds,ginger,pappya flavor to milk in China

-TV channels adopt sub titling,Google-multi script,Simpson US Serial Samshoorin Saudi Arabia

-Unilever reduces salt,fat,sugar in health conscious countries

-GmM offers Cadillac/Saturn for North America,Europe(Opel,Vauxhall,ChinaBuick

Legal requirements Product information, product safety (eg FDA in USA),productliability ,environmental issues,IPR

Mkt. Segmentation (dividing mkts into homogeneous clusters, looking for similar customervalue curves , californisation ofmkts,Levis,MTV target youth who follow global media)-US

firms focus on Latin America,with common Spanish language,cultural heritageProduct Introduction- cascading (saturate Affluent mkts first& laterenter low cost emerging

mkts) vs sprinkler approach ie simultaneous launch of new products(I_Pad)

Pricing

cost plus(affluent mkts like Japan for US Premium goods), mkt competitive price,incrementalpricing,below cost (attractDumping duties-WTO). Inter Division transfer pricing-Arms Length

Principle

Differential pricing across neighbouring countries can lead to grey Mkts(US/Canada fordrugs)

Location of value adding facilities in Free trade blocks can reduce duties.

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Pricing

Flexible cost plus(affluent mkts like Japan for US

Premium goods), mkt competitive price,incremental

pricing,below cost (attractDumping duties-WTO). Inter

Division transfer pricing-Arms Length PrincipleDifferential pricing across neighbouring countries can

lead to grey Mkts(US/Canada for drugs)

Location of value adding facilities in Free trade blocks

can reduce duties

Price escalation due to local currency depreciation-MNCs try to reduce Channel length eg Direct marketing

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Choice of media - While penetration of TV is much higher

in China compared to India,reverse is the case for News

print-Level of litracy in target Country.Mexico prefers

TV,Kuwait,Norway the Print.In Bolivia,preference is for bill

boards.

Advertising must respect cultural sensitivism. Eg Nike ran

an ad. Produced for US audience in China depictingNBA

Basket ball starLebron battling & defeating &finally

defeating a coputr generated Chinese Kung Fu master. This

was not liked in China & the ad was banned in China. On

the Contrary,Benetton,Italian Clothing manufacturer ran a

highly successful United Colors of Benetton,featuring

racial harmony,successfully world wide.

Choice of ad. Agency between a home country agency

with international experience,a local agency based in the

target mkt. or a global agency with local office.

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Promotional Activities:

In Europe,For example Portugal, Spain permit virtuallyevery type of promotion(coupons , samples,gifts(Germany,Norway ,Switzerland are very restrictive.

Global Account Mgmt: (GAM)

GAM refers to to servicing a key Global customer in aconsistent & standardized manner with uniform prices egWalmart is a key Global account for P&G

International distribution :

Can be from engaging intermediaries (full stosking

distributors) to establishing fully owned Mktsubsidiaries.(FDI), the latter giving greater control &closeness to customers.Japan has long channel length(no.of intermediaries0 Where feasible companies adaopt directmkt. to reduce channel length ,which only adds to thecost.

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Ethical &safety Issues:

Mcdonald sources coffee only fromgrowers certified by

Rain forest alliance who ensure sustainable income for

farmers. Nestle is a member of Fair Trade movement

offering growers above mkt coffee prices to its growers,Quant computrs inexpensive (100 Dollars) computers for

children in poor countries. Bicycles are specially designed

for heavy loads in rugged roads. Motorola devoloped low

cost sets for emerging mkts.

Disposal of waste/toxic products at end of product lifecycle. EUs Waste Elect.&Electronic Equipment(WEEE) law

makes it obligatory for manufacturers to take back eqpt.

at end of life &recycle.European law restricts use lead

,mercury in electronic eqpt.

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Exporting Thru intermediaries or fully owneddistribution chain

Licensing Bell Lab (AT&T) licensed Transistortechnology to Sony for commercialexploitation

Propreitary drug manufacture forspecific mkts or contract manufacturing forglobal distribution

Technical Collaboration ,Technical Consortium (Projects)

Franchising(Services)

Joint Ventures (for complementary skills,meetregulatory requirements for localpartner-Bhumiputra in

Malaysia,India(Hero Honda,Maruti Suziki).China

Acqusitions,Cross border mergers

100% Green field subsidiaries

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Mkt. variables target mkt .segment,merchandise

mix,promotional needs,global ormultidomestic

strategies,distributional differences.

Study of consumption patterns,income elasticity(increas

in income via vis incresae in consumption,GapAnalysis(segments not responding)

Out sourcing,off shoring Supply chain gets

extended(tariff/non tariff barriers),longer

transit,delays at custom points.