Transcript Managing the Multinational Enterprise

COURSE STRUCTURE
Classes 1-4
International business environment
Regional vs. global
Triad and IB activities
Politics, culture, trade and finance
Classes 5-9
Firm-specific advantages and firm management
Organization
Production
Marketing
International HRM
Political risk management
International financial management
Class 10
Country-specific advantages
Classes 11-14
Locational choice and regional management
European Union, North America, Japan, and Emerging Markets
STRUCTURE
Group Assignment 2
Marketing Strategy
Group Assignment 3
Review and Q&A for the MT
IN CLASS ASSIGNMENT
 Read the case of Flextronics on pages 317 -31 8 in your textbook (5 th ed.),
and answer the following question:
 If Flextronics would want to move up its position in the global value chain
(GVC), should it choose for ward, backward, or horizontal integration?
Please explain the reasons. Please also give some specific examples, what
industries/products should Flextronics take over?
GROUP ASSIGNMENT 2
 Benefits of three types of integration
 1) For ward
 Expand from manufacturing to
branding/marketing/di stributi on/sales
 “Flextronics, the largest EMSP, is one of the
For tune Global 500 companies, but most end customer s who use its products have never heard
of it. […] the company has strong ties to the US
market and most of its customer s are US
companies”
 – merge with one of these US companies that also
have a strong distribution/sales channels to end
customer s, e.g., MS Xbox, Motorola, etc. (*IBM PC
already bought by Lenovo in 2005)
GROUP ASSIGNMENT 2
 B e n e f i t s o f t h r e e t y p e s o f i n te g r a t i o n
 2 ) B a c k wa r d
 E x p a n d f r o m m a n u f a c t ur i n g to R & D a n d te c h n o l o g y
 “ E M S P s d o m u c h m o r e t h a n p r o v i d e c o s t - ef fe c t i ve
m a n u f ac t ur i n g . T h ey h e l p i n t h e d e s i g n o f p r o d uc t s to
m a ke t h e m e a s i e r to m a n u f a c t ur e ; t h ey a l s o p r o v i d e
l o g i s t ic s s e r v i c e s [ … ] ”
 – a c q u i r e h i g h - e n d te c h n o l o g y p r o v i d e r s f o r n o t o n l y
m a n u f ac t ur i n g , b u t a l s o p r o d uc t d e s i g n , n ew p r o d uct
d ev e l o p me n t ( N D P ) , a n d I T s o f t wa r e i n f r a s t r uct ur e f i r m s ,
e . g . , f u r t h e r a c q u i r e t h e R & D d e p a r t m e n t o f Xe r ox .
 Tr a n s p o r t a t i o n c o s t i s a l r e a d y v e r y l o w a n d t h e b e n e f i t s
o f a c q u i r i n g t r a n s p o r t a t i o n a r e m a r g i n al .
 R aw m a te r i a l s i n d u s t r y, w h i c h r e q u i r e s l a r g e i n i t i al
i nv e s t m e n t a n d s c a l e o f e c o n o my, a r e ex p e n s i v e to e n te r.
GROUP ASSIGNMENT 2
 Benefits of three types of integration
 2) Horizontal
 Fur ther merger s & acquisitions (M&As) in the same
industr y
 “In 2006, EMSP industr y revenues were estimated
at over $200 billion. In 2007, two of the largest
EMSP companies, Flextronics and Solectron,
combined when Flextronics, with revenues of
$1 8.854 billion, acquired Solectron, with revenues
of $10.561 billion.”
 – acquire other smaller competitor s.
GROUP ASSIGNMENT 2
 So m e c o m bi nat ions
 Opt i o n 1 : fo r wa rd + ba c k wa rd ( G o o gle - Motorola
t y pe )
 E . g . , a c q ui re a bra n d ( e . g . , IB M ) o f c o m pa ny w i t h
a c c e ss to e n d c us to m er s to ra i s e t h e m a rg in a n d
pro fi t a bi lit y, a n d t h e n us e ret a i n ed e a rn ing to
fur t h e r a c q ui re t h e R& D / te c hn olo gy prov i de r s fo r
t h a t c o m pa ny.
 Opt i o n 2 : h o ri zo nt al + fo r wa rd ( Co c a Co l a – Auj a n
t y pe )
 E . g . , a c q ui re a c o m pet i to r w h o a l so h a s s t ro n g
t i e s to a l a rg e di s t ri butor
 Opt i o n 3 : h o ri zo nt al + ba c k wa rd
 E . g . , a c q ui re a c o m pet i to r w h o a l so do e s n ew
pro duc t deve lopmen t
 Opt i o n 4 : h o ri zo nt al + fo r wa rd + ba c k wa rd
 E . g . , a c q ui re a c o m pet i to r w h o do e s bot h
bra n di n g a n d pro duc t deve lopme nt
COURSE STRUCTURE
Classes 1-4
International business environment
Regional vs. global
Triad and IB activities
Politics, culture, trade and finance
Classes 5-9
Firm-specific advantages and firm management
Organization
Production
Marketing
International HRM
Political risk management
International financial management
Class 10
Country-specific advantages
Classes 11-14
Locational choice and regional management
European Union, North America, Japan, and Emerging Markets
COURSE STRUCTURE
Classes 1-4
International business environment
Regional vs. global
Triad and IB activities
Politics, culture, trade and finance
Firm-specific advantages and firm management
Organization
Production
Classes 5-9
Marketing
International HRM
Political risk management
International financial management
Class 10
Country-specific advantages
Classes 11-14
Locational choice and regional management
European Union, North America, Japan, and Emerging Markets
MARKETING STRATEGY
INTERNATIONAL MARKET ASSESSMENT
 An evaluation of the goods and services that the MNE can sell
in the global marketplace.
1.Basic need and potential
2.Financial and economic conditions
3.Political and legal forces
4.Socio-cultural forces
5.Competitive environment
6.Final selection
1. BASIC NEED AND POTENTIAL
 Who might be our buyer s?
 Similar markets that allow impor ts of our goods/ser vices
 Current import policies
 Statistical reports of trade
 Similar goods/ser vices are being produced/sold
 Indirect approach: common historical roots, similar cultures, etc.
 Direct approach: do field study
 Local changes in, e.g., demography, that create a potential
market
 Statistical reports of population
2. FINANCIAL AND ECONOMIC CONDITIONS
 Market size
 Market intensity
 “Richness” of the market or purchasing power
 Market growth
3. POLITICAL AND LEGAL FORCES
 Entr y barrier s in the form of impor t
restrictions or limits on local owner ship
 Political stability
 Auto sales to Russia in 1990s despite
eagerness
 Protection of patents, trademarks, and
copyrights
 Brands and technologies in China and Taiwan
4. SOCIO-CULTURAL FORCES
 Language (e.g., sharing a common language)
 Work and life habits (e.g., impor tance of health and nutrition)
 Customs, religions, and values
e.g., former British Empire colonies
5. COMPETITIVE ENVIRONMENT
If there are multiple potential markets of
entry, all things being equal, a company
tends to enter the least competitive market.
Benefits of joining the competition vs. drawbacks
Measure of the degree of industry competition
 Concentration ratio: e.g., total market share of the eight
largest firms in an industry
6. FINAL SELECTION
Site visits and speaking to a variety
of stakeholders (e.g., trade reps,
local officials, etc.)
STRATEGIZING MARKETING:
4P FRAMEWORK
Product
Promotion
Price
Place
PRODUCT STRATEGY
 Modification by products
Little if any modification
required
Moderate amount of
modification required
Heavy equipment
Automobiles
Electronic watches
Clothing
Notebook computers
Appliances
Chemical processes
Pharmaceuticals
Writing implements
Aircraft
Cameras
Athletic running shoes
 Source:
Rugman and Collinson
Tennis rackets
Television(2012).
sets
Cigarettes
Beer
Extensive modification
required
High-style consumer goods
Cosmetics
Prepackaged foods
Education products
Advertising
Packaging
Restaurant meals
Health products/services
Cultural products
Consumer distribution
REASONS FOR MODIFICATION
 Economics
 Chewing gum package (10-12 sticks in the US; 5 in low income countries)
 Culture
 Washer load from the top in France vs. from the front in UK;
High-speed dryer in Germany vs. slower pin speed in Italy;
Strong coffee in South America vs. low in North America;
Facebook (非死不可), if in China.
Sichuan Food
 Local laws
 E.g., US-emission-control laws require Japanese and
European car importers to significantly change their
models; In Saudi Arabia, the label of any product containing
animal fat/meat must clearly state the kind of animal used
and the fact that no swine products are included; Google in
China.
 Product life cycle
Chengdu, Sichuan
 High-end fashion (4 seasons a year) vs. fast fashion (e.g.,
Zara: new products twice a week, adding up to more than
10,000 new designs a year partially due to fast supply
chain 10-15 days from design to sales floor.)
North America
PROMOTION STRATEGY
 A process of stimulating demand for a company’s goods and ser vices:
 e.g., adver tising and per sonal selling.
 Identical product and identical message
 A.T. Cross
 Identical product but modified message
 Vehicles (e.g., luxury, convenience, efficiency)
 Modified product but identical message
 Washing machines (e.g., open from top vs. front)
 Modified product and modified message
 Taste- and culture-sensitive food (e.g., Marmite, a case to be briefly
discussed)
PRICING STRATEGY
 Government controls
 e.g., minimum price for local protection
 Market diversity
 e.g., luxury pricing of ordinary products in poorer countries
 Currency fluctuations
 Price escalation forces
PLACE STRATEGY
Distribution
The course that goods take between
production and the final customers
Hire or build?
 More culturally dissimilar, less financially
prepared, lower brand reputation, and more
managerially risk-averse  more likely to
hire local distributors…
BANG & OLUFSEN’S 4P STRATEGIES
HQed in Denmark
In 1925, evolved into the Rolls -Royce of the audio and visual industr y
Producing luxur y televisions, audio systems, visual industr y.
1 ,400 stores in 60 countries, it sells select high -end, luxur y niche
products at high prices.
The customer is typically male, over 35, and af fluent, as well as
young, educated, the sign fanatic, and the “gray gold” couples whose
children have lef t the nest.
Review questions:
In which position of CSA/FSA matrix is B&O?
What is its current generic strategy?
Is this gen strategy consistent with its CSA/FSA position?
BANG & OLUFSEN’S 4P STRATEGIES
Product strategies
Industr y norm: consumer research, corporate ethnographers, and
creative teams
B&Q: visionar y designers, who can veto anything failing to meet their
visionar y standards
Result: demand continues to increase af ter the fir st wave of new prod
introduction, e.g., BeoLab 8000 Speakers $3,000 in 1992 a pair, now
over $4500, etc.
BANG & OLUFSEN’S 4P STRATEGIES
Promotion strategies
Focus on pristine quality and design, and carefully choose its par tners
to protect its premium image.
Some major achievements:
German Audi sound system with $6,155 option, and 15% Audi A8
users opted for the B&O.
British Aston Mar tin.
Luxur y Grand Lisboa hotel in Macau, China (>50,000 tourists)
BANG & OLUFSEN’S 4P STRATEGIES
Pricing strategies
Exclusivity (high -end)
e.g., $13,250 for 40 -inch BeoVision 7HDT V
BANG & OLUFSEN’S 4P STRATEGIES
Placing strategies
Worldwide, company -owned stores and private retailers f t. premium
products.
FOOD TASTING
Class Break
plus
Happy Hour
GROUP ASSIGNMENT 3
A SIMULATION
 Export Manager David Leech of British Marmite
Company, a UK-based breakfast spread producer, is
looking to expand to the growing Asian food markets
and now evaluating its marketing strategies.
 Watch the case in video,
and answer the questions
following the frameworks we
just studied.
Asian countries that have achieved
>5% GDP growth rate over the past
five years: Mongolia, Macau, Laos,
China, India, Cambodia, Sri Lanka,
Thailand, Indonesia, Bangladesh, etc.
REVIEW & Q&A FOR MT
 Tot a l : 1 h r 3 0 m i n , 2 5 % o u t o f 10 0 % o f t h e e n t i r e c l a s s
 G o o d n e w s : yo u a r e a l l owe d to b r i n g a n A 4 o n e - s i d e d c h e a t i n g s h e e t .
 Part 1. Single choice questions
 15 x 1%
 Examples:
 (1) Which of the following is NOT part of trade?
 (A) Import; (B) Export; (C) Foreign direct investment
 (2) Assume that today’s exchange rate is 1USD/Euro, and the interest rate in US dollars is
2% annually, and the interest rate in Euro dollars is 0. Following international fisher effect
and assuming no compounding, which of the following is MOST likely to be next year’s
exchange rate for USD/Euro?
 (A) 1.00; (B) 1.02; (C) 1.2
 P a r t 2 . S h o r t e s s ay s
 2 x 5%
 Examples:
 1) Please list the five major modes of the internationalization process, and give an example for
each.
 2) One of the practical questions (with diff numbers) on the theor y of comp. adv.