COURSE: INTERNATIONAL BUSINESS (INE2028-E)

MID-TERM EXAM
Time: 60 minutes

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PART I: SHORT ESSAYS (40 points)

In a short essay, discuss the impact of market globalization on consumer lifestyles and preferences
around the world. Provide examples to illustrate your answer.

The globalization of markets means moving away from an economic system in which national
markets are distinct entities, isolated by trade barriers and barriers of distance, time, and culture,
and toward a system in which national markets are merging into one global market.

Nowadays, falling barriers to cross-border trade have made it easier to sell internationally.
Technological innovations have also facilitated the globalization of markets. Low-cost global
communications networks such as the World Wide Web are helping to create electronic global
marketplaces. Low-cost transportation has made it more economical to ship products around the
world, thereby helping to create global markets. In addition, low-cost jet travel has resulted in the
mass movement of people between countries. This has reduced the cultural distance between
countries and is bringing about some convergence of consumer tastes and preferences. At the same
time, global communication networks and global media are creating a worldwide culture. U.S.
television networks such as CNN, MTV, and HBO are now received in many countries, and
Hollywood films are shown the world over. In any society, the media are primary conveyors of
culture; as global media develop, we must expect the evolution of something akin to a global
culture. A logical result of this evolution is the emergence of global markets for consumer
products. The first signs of this are already apparent. It is now as easy to find a McDonald’s
restaurant in Tokyo as it is in New York, to buy an iPod in Rio as it is in Berlin, and to buy Gap
jeans in Paris as it is in San Francisco.

So what are the impacts of the globalization of markets?

PART II: CASE ANALYSIS (60 points)

Vodafone in Japan

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In 2002 Vodafone Group, based in the United Kingdom and the world’s largest provider of
wireless telephone service, made a big splash by paying $14 billion to acquire J-Phone, the number
three player in Japan’s fast-growing market for wireless communications services. J-Phone was
considered a hot property, having just launched Japan’s first cell phones that were embedded with
digital cameras, winning over large numbers of young people who wanted to send photos to their
friends. Four years later, after losing market share to local competitors, Vodafone sold J-Phone and
took an $8.6 billion charge against earnings related to the sale. What went wrong?
According to analysts, Vodafone’s mistake was to focus too much on building a global brand and
not enough on local market conditions in Japan. In the early 2000s, Vodafone’s vision was to offer
consumers in different countries the same technology, so that they could take their phones with
them when they traveled across international borders. The problem, however, was that Japan’s
most active cell phone users, many of them young people who don’t regularly travel abroad, care
far less about this capability than about game playing and other features that are embedded in their
cell phones.
Vodafone’s emphasis on global services meant that it delayed its Japanese launch of 3G phones,
which allow users to do things such as watch video clips and teleconference. The company, in line
with its global branding ambitions, had decided to launch 3G cell phones that worked both inside
and outside Japan. The delay was costly. Its Japanese competitors launched 3G phones a year
ahead of Vodafone. Although these phones worked only in Japan, they rapidly gained share as
consumers adopted these leading-edge devices. When Vodafone did finally introduce a 3G phone,
design problems associated with making a phone that worked globally meant the supply of phones
was limited, and the launch fizzled despite strong product reviews simply because consumers could
not get the phones.
Questions:
1. Why do you think Vodafone was pursuing the global standardization strategy in the
early stages after purchasing J-Phone?
Global standardization strategy focus on increasing profitability and profit growth by reaping
the cost reductions that come from economies of scale, learning effects, and location
economies. Also, Vodafone aims at building a global brand and to offer consumers in
different countries the same technology, so that they could take their phones with them when
they traveled across international borders. So to pursues that aim, they used the global
standardization strategy to reap the cost reductions from the economies of scale or learning
effects or location economies. And since they seek for globally aim, they hve invested in too
many countries and in those countries their strategy of global standardization has succeeded
my times, which made them think that Japan is the same so they still used that strategy on
Japan. Or since they have invested in too many countries, it forced them to minimized the
costs when entering Japan, so they didn’t customize their product offering and marketing
strategy to local conditions because customization involves shorter production runs and the
duplication of functions, which tends to raise costs. In stead they would just sell large

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 quantities of the same, non-adapted product and buy components in bulk so they can reduce
the cost-per-unit.
2. Why is this strategy ineffective in Japan?
Global standardization strategy makes most sense when there are strong pressures for cost
reductions and demands for local responsiveness are minimal. However in Japan cell phones
market, demands for local responsiveness remain high. Vodafone wanted to create phones
that can be used globally so they apply this strategy everywhere in the world, this is the
biggest mistakes since Japan’s active cell phone users are mostly young people and they care
much more about games and other features in game like photo shooting or watching video
clips. Meanwhile Vodafone focus on making phones that has features that fit other countries
demand, not Japanese demand, so this makes the strategy ineffective. Plus Vodafone is not
having pressure for cost reductions since it is the world’s largest provider of wireless
telephone service of its time so they could have change the strategy.
So in conclusion, the main reason is because they lack of market understanding.
3. What should Vodafone do differently?
A localization strategy customize the firm’s goods or services so that they provide a good
match to tastes and preferences in different national markets. By customizing the product
offering to local demands, the firm increases the value of that product in the local market.
So, they should have avoided using Global strategy and used Localization strategy instead.
They should have considered the tastes of the local people. Also, Vodafone should have used
its competitors’ products and services offering as a benchmark for its own services. And since
in Japan most active cell phone users are young people, they should focus on satisfying this
field of customer. Moreover, because J-Phone had been on the market for over five years,
Vodafone should have used J-Phone’s local knowledge of the market and combined its
experience to create a winning team.
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ANSWER