Download A. Information Technology and Global Competition

CHAPTER 8
GLOBAL MARKETING STRATEGIES
CHAPTER OBJECTIVES
1. Information Technology and Global Competition
2. Global Strategy
3. Global Marketing Strategy
4. R&D, Operations, and Marketing Interfaces
5. Regionalization of Global Marketing Strategy
6. Competitive Analysis
CHAPTER OVERVIEW
Market oriented firms, facing greater competitiveness in world markets, find it essential
to assume a global perspective in designing and implementing their marketing strategies.
Cost containment, rising technological costs and the dispersal of technology, a greater
number of global competitors in many industries and the advent of hypercompetition in
most world markets mean that the firm interested in international competition must
continually refine and develop strategy. The strategies affect overall corporate goals and
objectives.
Strategic planning is an essential talent of today’s international marketing competitor. At
the heart of successful strategic planning is the use of information technology and
telecommunications to draw subsidiaries and markets closer together. In the end, a
global strategy must be responsive to national needs, while at the same time, exploit
opportunities on a global basis.
Strategic alignments through regional trading blocs have changed the normal competitive
balances in recent years. Globally minded, proactive firms increasingly exploit their
competitive position in some regions by funneling abundant resources and regionally
successful marketing programs to other regions where they do not necessarily occupy a
strong market position. In the future, managers must know and always be aware of the
key issues that will retain a competitive position.
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CHAPTER OUTLINE
A. Information Technology and Global Competition
1. Access to Information. Access to information and its proper communication
and use is a powerful strategic tool in global marketing. Advances in
information technology have made this tool more powerful and also more
difficult to control.
2. Real-Time Management. Information that managers have about the state of
operations of the firm are almost in real time. This greatly helps decision
making.
3. Information Technology, Access Tools, Telecommunication. The
combination of information technology, access tools, and
telecommunication has squeezed out huge chunks of slack from the operations
of the firm which were previously inefficient due to the slow and circuitous
nature of information flow within the firm with many holdups due to human
“switches.”
4. Online Communication. This form of communication helps salespeople and
problem solvers alike. Multiple design sites around the world in different time
zones can now work in sync, sequentially on the same problem.
5. Electronic Commerce (E-Commerce). In today’s world, e-commerce has
brought many opportunities and breaks every business free of the concept of
geographic distance. In December 2007, 71% of Americans used the
Internet.
6. E-Company. As information flows faster across the organization/MNCs.
and the number of “filtering points” between the source of information and the
user of the information decreases, the nature of the organization chart in the
multinational firm changes dramatically.
7. Faster Product Diffusion. The obvious impact of information technology is
the faster dispersion of technology and the shorter product life cycles in global
markets than ever before.
8. Global Citizenship. English is now the language of international business.
a). Global citizenship is no longer just a phrase.
b) The global environment demands a different form of strategy than that of
domestic marketing.
*****Use Review Question #1 Here*****
B. Global Strategy
1. Global Industry. These industries are defined as those where a firm’s competitive
position in one country is affected by its position in other countries and vice versa.
a. The first question that faces managers is the extent of globalization of their
industry.
b. Virtually every industry has aspects that are global.
c. Four major forces that determine the globalization potential of an industry are:
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i.
ii.
iii.
iv.
Market Forces
Cost Forces
Government Forces
Competitive Forces
*****Use Exhibit 8-1 Here; Use Review Question #2 Here*****
d. The differences between strategy in a multidomestic approach and a global
approach are quite profound.
i. In a multidomestic strategy, a firm manages its international activities like a
portfolio.
ii. A global strategy integrates the activities of a firm on a worldwide basis to
capture the linkages among countries and to treat the entire world as a single
borderless market.
e. In effect, the firm which truly operationalizes a global strategy is a geocentrically
oriented firm.
f. In an ethnocentric orientation, where managers operate under the dominate
influence of home country practices or a polytechnic orientation where managers
of individual subsidiaries operate independently of each other--the polycentric
manager in practice leads to a multidomestic orientation, which prevents
integration and optimization on a global basis.
*****Use Global Perspective 8-1 “Globalizing the Multidomestic Corporate
Culture” Here*****
*****Use Discussion Question #5 Here*****
2. Competitive Industry Structure.
a. Porter’s model that portrays the multidimensional nature of competitive
industry structure is described as being made of:
i. Industry competitors.
ii. Potential entrants.
iii. The bargaining power of suppliers.
iv. The bargaining power of buyers.
v. The threat of substitute products or services.
*****Use Exhibit 8-2 Here *****
3. Competitive Advantage.
a. Economies of scale remain the main feature of market competition.
i. The theory is that the greater the economies of scale, the greater the
benefits to those firms with a larger market share.
ii. As a result, many firms try to jockey for larger market shares than their
competitors.
b. A firm that builds its competitive advantage on economies of scale is known
as a cost leader.
c. Until flexible manufacturing and customized production becomes fully
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operational, cost leaders may be vulnerable to firms which use product
differentiation to better serve the exact needs of customers.
d. Another form of competition is niche marketing. This strategy focuses
exclusively on a highly specialized segment of the market and tries to achieve
a dominant position in that segment.
4. Hypercompetition.
a. Porter’s model does not show change circumstances.
b. Since all competition may be temporal, change must be accounted for.
c.. Hypercompetition postulates that firms compete in the following arenas:
i. Price and quality
ii. Timing and know-how
iii. Strongholds
iv. Financial resources
*****Use Global Perspective 8-2 “‘Rome’ Could Not be Built in a Day----Even by
AOL in China” Here; Use Review Question #3 Here*****
d. Because advantage is always fleeting, competitors constantly shift back and
forth between strategies seeking to gain advantage.
i. In essence, it is the firm which disrupts the existing status quo in the market
and is able to take advantage of the disruption, that has a competitive
advantage.
ii. To be able to disrupt the market, the firm must be close to the consumer and
faster to respond to their needs.
e. Firms generally seek to gain a first-mover advantage, especially stable
markets.
f. Followers are more likely to succeed where market and technology turbulence
exist.
g. The two approaches to gain competitive advantage seem to be:
i. Competitor centered
ii. Consumer centered
5. Interdependency.
a. Recent research has shown that the number of technologies used in a variety
of products in numerous industries is rising.
b. Resource limitations may be a reason for rising interdependency.
c. Component standardization is becoming popular.
*****Use Review Question #4 Here*****
C. Global Marketing Strategy
1. Global firms must consider whether to standardize their marketing mix with
respect to world wide expansion.
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*****Use Exhibit 8-3 Here; Use Review Question #5 Here*****
2. One of the fundamental requirements of a successful global marketing strategy is
the need to coordinate the marketing mix and other functions (such as R & D).
3. Benefits of Global Marketing.
a. Global marketing strategy can achieve one or more of four major categories of
potential globalization benefits:
1). Cost Reduction.
a). This arises from a savings in both workforce and materials.
b). Cost savings can also translate into increased program effectiveness by
allowing more money and resources into a smaller number of more
focused programs.
2). Improved Products and Program Effectiveness.
a). This may be the greatest advantage of a global marketing strategy.
b). Benefits from a multiple R & D location strategy would be:
1]. Integration of product attributes from multiple markets.
2]. Spreading of developmental costs.
3]. Increase in sources of product ideas.
3). Enhanced Customer Preference.
4). Increased Competitive Advantage.
a). Firms can magnify the competitive power of their programs.
b). Competitive intelligence increases.
4. Limits to Global Marketing.
a. Diversity of local environments, particularly cultural, political, and legal
environments.
b. Standardization versus adaptation (or any of the other derivatives).
c. Cultural and political constraints.
d. Critical technologies can transcend national borders.
*****Use Exhibit 8-4 Here*****
*****Use Review Question #6 Here; Use Discussion Questions #1, 3 and 4
Here*****
D. R&D, Operations and Marketing Interfaces
1. The value chain concept offers a general framework for understanding what it
takes to manage the interrelated value-added activities of a company on a global
basis.
*****Use Exhibit 8-5 Here*****
*****Use Global Perspective 8-3 “Power of Good Linkage Management”
Here*****
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a. A company is essentially made up of a collection of activities that are
performed to design, manufacture, market, deliver, and support its products. This
is its value chain.
2. R&D/Manufacturing Interface.
a. Technology is broadly defined as know-how.
b. By itself, technology will not provide a long-term advantage over competition.
c. Manufacturing innovations are more important strategically than product
innovations.
d. To facilitate the transferability of new product innovations to manufacturing,
designers should strive to make components that do not need to be re-tooled from
existing processes. Interchangeability is a significant advantage.
3. Manufacturing/Marketing Interface.
a. Reduce this inherent conflict.
b. Four different ways of developing global product policy are generally
considered an effective means to streamline manufacturing, thus lowering
manufacturing cost, without sacrificing marketing flexibility:
1). Core component standardization.
2). Product design families.
3). Universal product with all features.
4). Universal product with different positioning.
*****Use Discussion Question #2 Here*****
4. Marketing/R&D Interface.
a. This interface helps to establish the needs of the consumer as an important
aspect of strategy and planning activities.
b. With the example of the Japanese, the marketplace becomes a virtual R&D
laboratory for Japanese companies to gain production and marketing
experience as well as to perfect technology. This is done by close customer
contact.
c. The continual introduction of newer and better designed products brings a
greater likelihood of market success.
E. Regionalization of Global Marketing Strategy
1. Some firms may have organizational difficulties in achieving a global marketing
strategy.
2. In finding a balance between the need for greater integration and the need to
exploit existing resources more effectively, many companies have begun to
explore the use of regional strategies in Europe, North America, and the Pacific
Rim.
a. Regional strategies can be defined as the cross-subsidization of market share
battles in pursuit of regional production, branding, and distribution advantages.
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3. Two favorable effects of the formulation of regional trading blocs are:
a. The volatility of foreign exchange rates within a bloc seems to be reduced.
b. With the growing level of macroeconomic integration within regions, there is
also a trend toward greater harmonization of product and industry standards,
pollution and safety standards, and environmental standards.
4. To face regional forces proactively, other strategies that must be considered are:
*****Use Global Perspective 8-4 “Sony, Microsoft, and Nintendo Battling for
Global Dominance in the Videogame Industry” Here*****
a. Cross Subsidization of Markets. This concept refers to MNCs using
profits gained in a market where they have a strong competitive position.
b. Identification of Weak Market Segments. Firms should always identify weak
market segments in its home market.
c. Use of the “Lead Market” Concept. A lead market is where the local
competitive environment is creating those standards which will be adopted by
the rest of the world.
d. Marketing Strategies for Emerging Markets. BEMs have millions of middleclass consumers. Consumers in BEMs are increasingly aware of global
products and global standards.
*****Use Review Question #7 Here*****
F. Competitive Analysis
1. Firms must broaden their competitive base, but must also constantly re-evaluate
themselves to make sure that their current competitive position is secure.
2. SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) is a useful
technique for analyzing a firm’s competitive position as compared to its
competition.
3. A SWOT analysis looks at internal factors (Strengths or Weaknesses) and external
factors (Opportunities and Threats). Positions are very important.
4. All areas of the marketing mix must be examined (internal examination).
5. Externally, look at technological changes, legislation, sociocultural changes and
changes in the marketplace or competitive position.
6. SWOT is just one aid and does not automatically establish priority.
7. The aim of SWOT analysis should be to isolate the key issues that will be
important to the future of the firm and that subsequent marketing strategies will
address.
*****Use Exhibit 8-6 Here*****
REVIEW QUESTIONS
INSTRUCTOR’S NOTE: The following chapter review questions are meant to challenge
the student to think about material presented in the chapter and formulate a creative
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answer to the review questions. Many of the answers require judgments rather than
specific line-by-line quotation of facts. The answers provided are meant to provide
stimulation of creative answers.
1. How are the developments in information technology affecting the global
strategies of firms?
The development of transportation technology, including jet air transportation, cold
storage containers, and large ocean carriers changed the nature of world trade in the past
50 years after the Second World War. Since the 1980s, the explosion of information
technology, particularly telecommunications, has forever changed the nature of
competition around the world. Geographical distance has become increasingly less
relevant in designing global strategy. Areas most affected are: real-time management,
e-commerce, on-line communication, Internet organization, faster product diffusion, and
global citizenship.
2. What are the various factors/forces/drivers which determine the globalization
potential of industries? How are global industries different from multidomestic
industries?
To answer this question review the categories listed in Exhibit 8-1. Note the major
categories of market globalization drivers, cost globalization drivers, government
globalization drivers, and competitive globalization drivers and their associated subcategories. Note that the difference between global industries and multidomestic
industries is their nature, scope, management structure, and market thrust.
3. What do you understand by the term “hypercompetition?” What, according to
hypercompetition, are the various arenas of competition?
In any given industry, firms jockey among themselves for better competitive position,
given a set of customers and buyers, the threat of substitutes and the barriers to entry in
that industry. A new competitor may emerge from a completely different industry given
the convergence of industries. Such shifts in competition may follow a Schumpeterian
view that says creative destruction assumes continuous change. This basic assumption is
behind the hypercompetitive environment and strategy that says competition takes place
in three arenas: 1) a firm competes on price-quality basis vis-à-vis its competitors; 2) on
the basis of timing and know-how; 3) on the basis of creating strongholds in the markets
it operates in (this is akin to entry barriers); 4) on the basis of financial resources to
outlast one’s competitors.
4. How are the concepts “interdependency” and “standardization” related? What
are the implications for global strategy?
Recent research has shown that the number of technologies used in a variety of products
in numerous industries is rising continuously. With resource limitations of firms
circumscribing the number of distinctive competencies that a firm can be good at, firms
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now need to access technologies from outside the firm to be able to build a state-of-theart product. Since most firms operating globally are subject to the limitation of lack of all
required technologies, it follows that for firms to develop products that make optimal use
of technologies accessed from outside, a degree of standardization of the components is
required. Such component standardization would enable different firms to develop
different end products using, in a large measure, the same components.
5. How is a global marketing strategy distinct from standardization?
Global marketing is not about standardizing the marketing process on a global basis.
While every element of the marketing process (the marketing mix and other functions of
marketing) may be a candidate for standardization, standardization is one part of a global
marketing strategy and it may or may not be used by a company (depending on the mix
of the product-market conditions, stage of market development, and the inclinations of
the management of the multinational firm). Successful global marketing is a question of
coordination.
6. What are the benefits and limitations of global marketing strategies?
Benefits of global marketing strategy fall into four categories: cost reduction, improved
quality of products and programs, enhanced customer preference and increased
competitive advantage. The limits to global marketing include diversity of local markets,
the environments (cultural, political, and legal), the question of standardization versus
adaptation (or other derivatives), and the need to have transnational technology and
communication.
7. How are regional and global strategies different? What are some advantages and
disadvantages of a regional strategy?
The primary difference between regional and global strategies is the degree of planning,
organizational design to allow for coordination, and managerial expertise. The use of
regional trading blocs considers the need to exploit existing resources more effectively
and the encouragement from economic, political, and social pressures from the regional
trading blocs. The advantages might be with respect to currency and exchange
difficulties and the harmonization of standards. However, to make this work the trading
blocs must consider cross subsidization of markets, identification of weak market
segments, and the lead market concept. The inability to see “the big picture” may be the
chief disadvantage. Many regional strategists forget that there are other markets to be
pursued in the world environment.
DISCUSSION QUESTIONS
INSTRUCTOR’S NOTE: Discussion Questions are found at the end of each chapter in
the text. These questions (in many cases) are too lengthy to repeat in this manual.
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Suggestions for answering and discussing the questions are presented in this section.
Many of the questions require student opinion and judgment.
1. This question requires thought and consideration. A case could be made in either
direction. The student should be reminded, however, to examine carefully the issue of
global versus multidomestic using the suggestions and criteria suggested in the text.
Please note whether planning, organization, coordination, and control are global or
multidomestic. These beginning clues might be the best prescription for solution to the
problem presented in this question. Try to get two groups of students to present
arguments for both sides then have the class debate the answer. Lastly, the students
should perceive that the food industry is very diverse and that McDonald’s is not really a
benchmark for the industry.
2. As in Question #1, students could make a case for any of the alternatives presented in
this case. An additional decision factor might be new data that might be discovered by
the students’ research effort. A good technique for solution might be to assign different
student groups to approach the problem as if the company fits one of the four patterns
suggested. Then each group could present their findings to the class and let the class
discuss the merits of their solution.
Based on the information presented in the discussion question, more weight might be
given to the ethnocentric alternative (see discussion in the chapter), however, new
evidence might refute this suggested alternative.
3. To answer this discussion question the student must express an opinion (they should
be required to support the opinion presented). Through efforts of AACSB – The
International Association for Management Education and other accrediting agencies,
internationalism and global thinking has been mandated in business schools across the
country. However, whether or not this brief flirtation with international issues (through
one or two courses and some integration in core courses) has made any impact on the
corporate management system remains to be seen. It would appear that progress is being
made but only slowly. As companies begin to divert from multidomestic firms to global
firms, an increase in international management thinking and marketing practice will
certainly follow. The students should be encouraged to use their own business program
as a starting point for their investigation.
4. To formulate an answer to this discussion question, the students should be encouraged
to re-read the section in the chapter that deals with “Benefits of Global Marketing” and
review Global Perspective 8-3 “GM and Ford Pursue Different Benefits from Global
Marketing.” These sections will provide data with which the student might be able to
defend the statements made in this question. A useful technique for covering this
material might be to have a debate. Assign both sides of the issue to different teams and
ask for presentations to the class.
5. The attempt of this question is to make the students aware the difference between
regional and global strategies. In the case of China’s Internet market, there are many new
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players targeting millions of users. The U.S. search engine companies operating in China
should adjust their marketing strategies to deal with local tastes and consumption habits.
This will help win million of consumers. Disadvantages could include factors such as
cost and additional resources.
6. The wealthy in Asia who will pay for extras will be the only ones who might
otherwise purchase legitimate copies. With such rampant piracy rates in Asia, the model
is a creative means of gaining some revenue from the market. Moreover, if the model is
extended to all players for even smaller upgrades that can only be received from the
company, not existing software, more revenue could be garnered. Attempts to protect
software only result in eventual hacking or, as in Microsoft’s blow at Chinese pirates,
government backlash. Another revenue generating idea would be contests that require a
fee to participate.
The model could certainly be used in Western markets, following the idea of music
producers that charging a fee for downloads is better than chasing those who illegally
copy CDs or download them free from Napster. The risk there would be that Asians
might find a way to capture the upgrades and distribute them for free to fellow gamers.
STUDENT PROJECTS and INTERNET FOCUS
1. Go to the library and research the impact of information technology on global
competition. What factors (beyond those presented in the text) are having the greatest
impact? Try to focus on the role of the World Wide Web and its potential impact on
global competition. Report your findings to the class by means of a short discussion
paper. For this question, check the following Web sites: Doing Business on the Internet,
Library of Congress at (http://www.loc.gov/rr/business/ecommerce/inet-business.html)
and Okinawa Charter on Global Information Society
(http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan002263.pdf )
2. Using the information in Exhibit 8-2 (Nature of Competitive Industry Structure), find
an illustration of a company or an industry where you can illustrate the various factors
presented in the model from the exhibit. Be sure to document how and why you think
your information fits the model. Does the model accurately describe competition in the
industry or among the companies that you analyzed? What are your opinions on the
Porter technique for analyzing competition? Prepare a brief report summarizing the
information and conclusions you reached.
INSTRUCTOR’S NOTE: The following projects require the students to both use and
understand the Internet. If students do not understand how to use the Internet,
explanation should be given before these projects are undertaken. The Web sites
provided were current at the time of this writing. However, since Web addresses change
frequently, the instructor should re-affirm the site addresses and the content of the site
before making an assignment.
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3. Using the World Fact Book (https://www.cia.gov/library/publications/the-worldfactbook/index.html), examine the component parts of the model presented in Exhibit 8-1
(Industry Globalization Drivers). Pick three countries or regions of the world and see
what kind of information you can discover to answer the questions posed by the exhibit.
From this data, could you build a competitive industry model that would help a company
compete internationally? Whether you answer yes or no, what additional information
would you need to make your model more useful? Where would you get that
information? Prepare a report of your findings.
4. Take an international company of your choice and prepare a strategic business plan for
the company. Be sure to include a SWOTs analysis. The length and detail depends on
the preference of your instructor. For further detail, see:
(http://www.sbaonline.sba.gov/index.html), U.S. Small Business Administration.
5. One of the best sources for new information about competition among global firms is
Business Week magazine. Go to the Business Week home page at
(http://www.businessweek.com) and identify three global firms that you perceive to be in
competition with one another. Once you have done this, identify what you perceive to be
their primary strategy or strategies to meet their competition. Be sure to remember the
discussion used in your chapter on strategy formulation and types of strategies that might
be used. Describe how you diagnosed their strategy formats. If necessary, you can limit
your search to only one product line. Report your findings in a written format.
WEB RESOURCES
Development News Media Center, The World Bank Group
(http://www.worldbank.org/developmentnews/)
Elib: Electronic Commerce
(http://www.elib.org/)
Emerging Markets Financing, IMF
(http://www.imf.org/external/pubs/ft/emf/index.htm)
Emerging Market Online
(http://www.emerging-markets.com/index.html)
Emerging Markets Subject Guide, Yale University Library
(http://guides.socialsciencelibraries.yale.edu/emergingmarkets)
Financial Times
(http://www.ft.com/home/uk)
Forbes.com
(http://www.forbes.com/)
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Fortune.com
(http://money.cnn.com/magazines/fortune/)
Globalization
S. T. Anwar, West Texas A&M University
(http://wtfaculty.wtamu.edu/%7Esanwar.bus/otherlinks.htm#Globalization)
Globalization, World Bank
(http://econ.worldbank.org/external/default/main?menuPK=477838&pagePK=64168092
&piPK=64168088&theSitePK=477826)
The Japan Times
(http://www.japantimes.co.jp/)
LatinTrade.com
(http://www.latintrade.com/)
List of Companies, Wikipedia
(http://en.wikipedia.org/wiki/List_of_companies)
Measuring Globalization, Foreign Policy & ATKearney
(http://www.foreignpolicy.com/users/login.php?story_id=2493&URL=http://www.foreig
npolicy.com/story/cms.php?story_id=2493)
The Wall Street Journal
(http://online.wsj.com/home-page)
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