Professional Documents
Culture Documents
Competitive Strategies: Global vs. Local: © Professor Daniel F. Spulber
Competitive Strategies: Global vs. Local: © Professor Daniel F. Spulber
2
Global competitive strategies
5
Umbrella
brands:
Nestlé
products in
the super-
market.
Some
products
carry both
global
brand and
local
brand.
6
Global platform strategy
The global challenge
7
Global platform strategy
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
8
Global platform strategy
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
9
Global platform strategy
Reduces development and production costs
Used in automobiles, mobile phones, computers, aircraft
Example: Cost per product (development and mfg): $80
Cost of basic platform development: $100
Cost of each variation (development and production): $50
Use platform when serving four or more customer country
markets: Compare costs of serving four markets:
Distinct products: 4 x $80 = $320
Platform and 4 variations $100 + 4 x $50 = $300 ***
10
Global platform strategy
Product variety versus economies of scale
Business sells 10 units each in Country A and in Country F
• Unit costs – economies of scale
Two local products at 10 units each $ 30/unit
Global product at 20 units $ 20/unit
• Price company can charge per unit:
Global product: $80/unit in each country
Two local products: $95/unit in each country
Global versus regional product:
Tailoring brings $ 5 more earnings per unit
Profit greater by $ 100
Improve tradeoff with platforms and flexible factories to
realize economies of scope (mass customization)
11
Global platform strategy
International business managers make decisions about
what should be global versus local:
• Products
• Technology and inputs
• Manufacturing
• Brands
• Marketing
• Distribution
Example: Wal-Mart must compete with both international
players such as Carrefour and local retailers
12
Global platform strategy
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
13
Global platform strategy
• Most products are local and not branded. For example: in
food sector Nestle estimates that only 1 % of all goods in
food markets are branded
• Increasing number of international brands, Corona, Nestlé,
Sony
• Increasing brand variations: BMW 3-series (1990s):
More than 1 million varieties can be ordered
• Local distribution and marketing
Example: McDonald’s, Coca-Cola: Global brand, some local
product tailoring, reliance on local distribution
• Local technology, production, customer service
Acer computer company
14
Global network strategy
• Create network of customers, suppliers, partners
15
Global network strategy
Sellers Buyers The international business contributes
value by creating an international
network: Recall Li & Fung
21
Global network strategy
Partner networks: Global reach
British Airways / American Airlines
• Provide 60% of all transatlantic services
• "Alliance that Revolves Around You"
• ONEWORLD members: Iberia, Cathay Pacific, Quantas,
Finnair, Aer Lingus, Lan Airlines (Chile)
• The airlines cooperate on scheduling and ticketing, frequent
flyer programs, airport clubs, baggage handling, customer
service
• Competitive response to the STAR ALLIANCE from United,
Lufthansa, SAS, Air Canada and Thai Airways (210,000
Employees, flights to 578 cities in 106 countries)
• 600 destinations in 135 countries around the world, operating
over 8000 flights daily, 230 million passengers/year
22
Global network strategy
Partner networks: Technology standards
25
Global network strategy
Franchise networks
Advantages
• Rapid international growth
• Local ownership
• Local management
• Lower capital outlays
Disadvantages
• Search cost of finding franchise
owners overseas
• Costs of monitoring performance
across borders
• Transaction costs of forming franchise
contracts in other country remains
26
Global intermediary strategy
Matchmaker
Brings buyers and sellers together across
international borders
Market maker
Creates and operates markets that cross international
borders
Agent
Provide representation in other countries
27
Global intermediary strategy
Matchmaker
• Bridge international differences in goods and services,
business practices, law and regulations, currencies,
languages, time zones
• Provide value-added activities
• Representative agents in sales, distribution, purchasing,
financing, contracting, and supply chain managers
• Match offers to buyer and seller needs: product features,
location, time.
• Avoids costs of search for buyers and sellers
• Reduces buyer and seller risks from dealing with few
trading partners,
28
Global intermediary strategy
Matchmaker
• Language: Seller speaks • Time: Seller is in Japan, buyer is
Chinese, buyer speaks Spanish, in Mexico, intermediary operates
intermediary speaks both in both time zones
29
Mitsui
30
Mitsui
31
Mitsui
32
Mitsui is in top 15 of Fortune Global 500
http://www.mitsui.co.jp/tkabz/english/corp/index.htm
33
Global intermediary strategy
Beating bypass competition
Trade Transaction strategy
Country H offers innovative
Transaction cost T transactions
Your costs of trade T
Example: must be less than
Li & Fung competitor costs of
trade T*
Source Serve
Bypass competition Country A
Country B
Transaction cost T*
34
Global intermediary strategy
Market maker
• eBay
35
Global intermediary strategy
Market maker
Ingram Micro: the leading international
wholesaler of technology products and services
• Wholesales 280,000 computer hardware and software products
– think of number of prices!
• Sources in US and many other countries from 1,700
manufacturers
• Serves 175,000 resellers in more than 100 countries
• Serves through operations and affiliates in 35 countries
• Establishes prices, coordinates sales and purchases, clears the
market, allocates products
36
Global intermediary strategy
Market maker
• Creates and operates international markets
• Chooses prices, conveys information
• Adjusts sourcing and serving to clear markets – avoids
efficiency losses from market imbalances
• Provides immediacy: ready to buy and sell
• Allocates goods and services across countries
• Gathers and aggregates information about customers and
suppliers on an international level, inventories, orders, and
production
• Applies IT to international coordination
• Earns returns from international risk pooling
37
Global intermediary strategy
Agents
• Export Marketing Company (EMC) represents sellers,
can be broker or dealer, bears risks, arranges resale,
transportation, credit
• Export Trading Company (ETC) represents buyers,
handles imports, usually takes title to goods
• Act as international agent: provide expertise in negotiation,
market knowledge
• Provide trust to buyers and sellers
• Allows principal to delegate authority for distant
transactions
• Provides market expertise, often to smaller firms
38
Global intermediary strategy
More agents
• Piggyback arrangements: e.g. Sony distributes in Japan for
Whirlpool; GE Trading Co. distributes for other US
manufacturers in Africa and Latin America
• General Trading Companies: In Japan, there are Sogo
Shosha (large scale) and Senmon Shosha (smaller scale)
trading companies. Similar companies exist in Europe, South
Korea, Taiwan, Singapore and Hong Kong
• Government Procurement Agencies, e.g. China Central
Trade Offices
• Distributor/Importer (jobbers, dealers, wholesalers)
• Direct sales (representatives that work on commission)
• Overseas retailers, wholesalers
39
Global entrepreneur
strategy
42