Globalisation Continued

• Growth in World Trade and Investment

• Phenomenal growth has taken place in trade and investment between countries

Why go international?

• Increase size of potential market

• Increase in scale of operations

- enjoy economies of scale;

-spread of operations on fixed costs

Why International?

• Extend life cycle of product– Dell and HP have sought international

expansion as US markets get saturated

• Performance enhancement– Microsoft’s research lab in Cambridge, UK

Risks

• Need to overcome liability of foreignness

• Foreign firms are discriminated against– Japan and Europe resist buying US

beef and rice because of genetic modification

Key Dilemma: Local vs. Global

• The local responsiveness solution– Customize organizations and products to country

or regional differences

• The global integration solution– Reduce costs with worldwide standardized

products, uniform promotional strategies and distribution channels

– Seek lower costs or higher quality anywhere in the value chain and in the world

International business managers make decisions about what should be global versus local:

• Products

• Technology and inputs

• Manufacturing

• Brands

• Marketing

• Distribution

What Global Strategy?• Traditional “global strategy” is treating

different countries as one worldwide or “global” market.

– World car: Ford Contour (as the Mondeo in Europe)

– World drink: Coke Classic

– World advertising commercial: Polar bear ads

Forces calling for global products (standardization):

• Convergence in customer preferences and income across target countries with economic development and trade

• Competition from successful global products• International brand awareness• Cost benefits from standardization• Falling costs of trade with greater globalization

Global Brand- The Mini

• BMW reintroduced the Mini in 2001

• Car sold as a compact urban car

• Product sold to similar target market in Europe, North America and Australasia

Global Brand- The Mini

• Marketing Strategy similar across boundaries

• Product variances exist but are marginal across borders

Forces calling for local products (customization):

• Differences in customer preferences and income across target countries

• Build local brand recognition• Competition from successful domestic

products• Regulatory requirements (quality, safety,

technical specifications, domestic content) -- EU product standards

• High costs of trade create separate markets

Local Strategy

• Local markets are linked within a region

• Gives top priority to local responsiveness issues

• A form of the differentiation strategy

• Not limited to large multinationals

Local brand positioning of a global brand and global product

• Corona sells the same beer, produced in 8 plants in Mexico, all over the world

• Advertising adapts to target countries: begins as a working class beer in Mexico, becomes a high quality import in most other countries.

• Marketing adapts to local markets• Corona coordinates internationally through its

subsidiaries

Thinking Local, Succeeding

Global• LG Electronics• $38b powerhouse in electronics and appliances• Top producer of AC and top 3 players in

washing machines, microwaves and refrigerators• Why? Focus on in-depth localization• Emphasize understanding of in-country market

research, manufacturing and marketing• Gone are the days of the global brand

Examples

• LG is market leader in India• Fridges that have larger vegetable and

water storage compartments• Surge-resistant power supplies• Bright colour finishes that reflect local

preference• TV for cricket fans with inbuilt cricket

video games

Risks/Problems withGlobalisation

• Loss of identity operations for a common culture

• More vulnerable to environmental risk• Difficult to manage – requires coordination of

divergent cultures• Lack of local flexibility and responsiveness• Research shows that companies feel

regionalisation is more manageable and less risky

Case Study

• MTV launched in the USA in 1981 as the first provider of a music only channel

• Early MTV consisted predominantly of popular music videos played 24-7

• 1984 Launches sister channels VH-1 and Nickelodeon

• 1987 MTV Europe Launched

Case Study

• 1997 MTV UK & Ireland Launched• 2001 change of strategy to move towards

more programme based channels than music• By 2010 it is responsible for over 200

channels worldwide in Asia, South America and Africa

• In the majority of cases the MTV brand is used and the concept of channel is similar

Case Study

• However, there are differences– In the UK MTV own and run 14 channels with

each delivering to a niche market– The UK channels have a mixture of both music

and mainly US based reality programmes– MTV Europe has less reality programming and

is still predominantly music based– MTV India focuses a large amount of its

programming to US (Hollywood films)

Case Study

• However, there are differences– MTV Brazil focuses mainly on domestic music

and produces own shows rather than ones from the other MTV Channels

– MTV China focuses on Western music

• MTV is a global brand where the concept/mission/objectives of the organisation have been translated globally

Case Study

• However, MTV have realised that a one size fits all approach does not work

• They have realised the different music tastes that exist across nations, and whilst some programmes such as ‘The Osbournes” could be produced in the US and sold to many nations around the world, they may not have suitable for other networks.