MANAGING IN GLOBAL CONTEXT
Adaptation: Adjusting to Differences
Sameer Mathur, Ph.D. http://BuddingMarkets.com
Sameer Mathur
BuddingMarkets.com
Marketing Professor 2009 – 2013
Ph.D. and M.S. (Marketing) 2003 – 2009
Marketing Professo...
• Introduction to ADAPTATION as a Global Strategy
– Overview
– Importance
– Purpose
– Difficulties
– Example: Home Applian...
• Adjusting parts of a company’s business model to be
suitable for local markets
• ex. Coke is slightly different across m...
The world is globalized but
many differences exist
between countries and
cultures.
Adaptation involves adjusting
to these ...
• Increase demand
• Enhance sales/willingness to pay
Purpose/Benefits of Adaptation
Companies often believe all consumers in
developed countries live similar lifestyles
Observation proves differently
Diffic...
• Cross-border variation exists amongst
appliances
• Additional domestic differences can exist
Example: Home Appliances
Cultural
Differences
Administrative
Differences
Geographic
Differences
Economic
Differences
Idiosyncratic
Differences
Elec...
In addition to cross-border variation:
• color
• material
• size
• energy efficiency
• noisiness
• environmental friendlin...
Products need variety, so firms must apply
different levers and sublevers to
implement ADAPTATION.
Levers and sublevers ar...
VARIATION
FOCUS
(Reduce need
for Variation)
EXTERNALIZ
ATION(Reduc
e burden of
variation)
DESIGN
(Reduce cost
of variation...
VARIATION:
FOCUS
(Reduce need
for Variation)
EXTERNALIZ
ATION(Reduc
e burden of
variation)
DESIGN
(Reduce cost
of variatio...
Even standardized
products must be
varied a great deal.
Example: Adapting
Windows to different
languages such as
Arabic, w...
Policies are used in an attempt to strike a
balance between internal consistency and the
external environment.
Example: Li...
Repositioning involves broadly changing
the entire position of a product.
Example: Coke in India and China are sold for
lo...
This requires the
adjustment of
profitability targets
to different levels
across countries.
Example: Whirpool remains
pres...
VARIATION:
FOCUS
(Reduce need
for Variation)
EXTERNALIZ
ATION(Reduc
e burden of
variation)
DESIGN
(Reduce cost
of variatio...
Sublevers:
• Product Focus
• Geographic Focus
• Vertical Focus
• Segment Focus
Focus: Reduce Need for Variation
Firms focus on specific geographies,
products, or vertical stages.
This reduces the need for variation
and keeps complexit...
Globally there are
significant differences in
the amount of variation
required in specific
product categories.
Example: Un...
Restriction to a specific geographic
scope can increase success by
minimizing coordination problems,
distances, and differ...
Firms focus only on specific activities in their value
chains in order to simplify cross-border operations.
Example: Bruns...
Firms only target specific segments.
Example: Zara focuses on fashion-sensitive consumers
by capitalizing on quick invento...
VARIATION:
FOCUS
(Reduce need
for Variation)
EXTERNALIZ
ATION(Reduc
e burden of
variation)
DESIGN
(Reduce cost
of variatio...
Sublevers:
• Strategic Alliances
• Franchising
• Adaptation and Networking
Externalization: Reduce burden
of Variation
Externalization occurs when firms develop joint
ventures and partnerships in order to reduce
internal burden.
Externalizat...
Strategic alliances provide firms with access
to local knowledge and connections
otherwise inaccessible in distant markets...
Franchising helps chains
relax their internal growth
constraints in order to
increase local
responsiveness and achieve
inn...
This requires the involvement of customers
and other third parties, i.e. through the use
of mashups.
Example: Linux’s open...
VARIATION:
FOCUS
(Reduce need
for Variation)
EXTERNALIZ
ATION(Reduc
e burden of
variation)
DESIGN
(Reduce cost
of variatio...
Sublevers:
• Flexibility
• Partitioning
• Platforms
• Modularity
Design: Reduce Cost of Variation
Design works to reduce the
cost of, rather than need, for
variation.
Design
Flexibility requires the
design of business
systems that reduce fixed
costs attributed to
variation.
Example: Amazon sells...
Partitioning requires firms to separate the
elements which are variable from those that
are integral to their business str...
Platforms are utilized as a method of
cost-effective customization.
Example: McDonald’s creation of
combi oven that can co...
Modularity defines the
standardized
interfaces between all
key elements in order for
firms to mix and match.
Example: Comp...
VARIATION:
FOCUS
(Reduce need
for Variation)
EXTERNALIZ
ATION(Reduc
e burden of
variation)
DESIGN
(Reduce cost
of variatio...
Sublevers:
• Transfer
• Localization
• Recombination
• Transformation
Innovation: Improve
Effectiveness of Variation
Innovation works to improve the
effectiveness of adaptation efforts
through the creation of new products
or ideas.
Innovat...
Transferring innovations
from one part of the world
to another.
Example: The expansion of Disney’s
US model to create Lati...
Localization involves explicit focus on
innovation in a target geography.
Example: Shampoos in India are designed for
extr...
Melding elements of the
parent’s business model with
opportunities that arise in
new contexts.
Example: The Indian version...
Transformation reduces the need for
adaptation by seeking to shape/transform
local environments in which the firm
operates...
VARIATION:
FOCUS
(Reduce need
for Variation)
EXTERNALIZ
ATION(Reduc
e burden of
variation)
DESIGN
(Reduce cost
of variatio...
Adaptation cannot be applied in
isolation; aggregation and arbitrage
strategies must also be applied
simultaneously.
Apply...
• Introduction to ADAPTATION as a Global Strategy
– Overview
– Importance
– Purpose
– Difficulties
– Example: Home Applian...
Recommended Reading
Over 1 Million views
from more than 100 countries
www.BuddingMarkets.com
Prof. Sameer
Mathur
Over 250 presentations on
Mar...
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Managing in Global Context via Adaptation

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  • Reproduction of Table 4-2 from Adaptation: Adjusting to Differences: Strategies for Global Value Creation, by PankajGhemawat. Harvard Business Press, Chapter 4, p. 107-137
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  • Reproduction of Table 4-2 from Adaptation: Adjusting to Differences: Strategies for Global Value Creation, by PankajGhemawat. Harvard Business Press, Chapter 4, p. 107-137
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  • Reproduction of Table 4-2 from Adaptation: Adjusting to Differences: Strategies for Global Value Creation, by PankajGhemawat. Harvard Business Press, Chapter 4, p. 107-137
  • Managing in Global Context via Adaptation

    1. 1. MANAGING IN GLOBAL CONTEXT Adaptation: Adjusting to Differences Sameer Mathur, Ph.D. http://BuddingMarkets.com
    2. 2. Sameer Mathur BuddingMarkets.com Marketing Professor 2009 – 2013 Ph.D. and M.S. (Marketing) 2003 – 2009 Marketing Professor 2013 – Indian Institute of Management, Lucknow
    3. 3. • Introduction to ADAPTATION as a Global Strategy – Overview – Importance – Purpose – Difficulties – Example: Home Appliances • ADAPTATION Tools – Levers and Sublevers – Competitive Strategies • Applying ADAPTATION Agenda - Adaptation
    4. 4. • Adjusting parts of a company’s business model to be suitable for local markets • ex. Coke is slightly different across markets. An Overview of Adaptation
    5. 5. The world is globalized but many differences exist between countries and cultures. Adaptation involves adjusting to these differences. Importance of Adaptation
    6. 6. • Increase demand • Enhance sales/willingness to pay Purpose/Benefits of Adaptation
    7. 7. Companies often believe all consumers in developed countries live similar lifestyles Observation proves differently Difficulties of Adaptation
    8. 8. • Cross-border variation exists amongst appliances • Additional domestic differences can exist Example: Home Appliances
    9. 9. Cultural Differences Administrative Differences Geographic Differences Economic Differences Idiosyncratic Differences Electrical Standards: -plugs and outlets -voltages -cycles Climate: -temperature -sunlight Income Levels: lower cost or willingness-to-pay Derived Entrenchment Environmental Regulations Bulk or low value- to-weight ratios Growth: new household formation Mostly mature products Protectionism (tariffs up to 20% in US) Price/availability of substitutes or complements: -space -electricity Lack of consumption externalities CAGE Framework: Cross-Border Variation in Home Appliances
    10. 10. In addition to cross-border variation: • color • material • size • energy efficiency • noisiness • environmental friendliness • layout • door design • shelf configuration • freezer position • defroster • controls Domestic Differences Among Appliances
    11. 11. Products need variety, so firms must apply different levers and sublevers to implement ADAPTATION. Levers and sublevers are not mutually exclusive but serve as a set of options for firms to choose from. Tools for Adaptation
    12. 12. VARIATION FOCUS (Reduce need for Variation) EXTERNALIZ ATION(Reduc e burden of variation) DESIGN (Reduce cost of variation) INNOVATION (Improve effectiveness of variation) products products strategic alliances flexibility transfer policies geographies franchising partitioning localization repositioning verticals user adaptation platforms recombination metrics segments networking modularity transformation Adaptation: Levers and Sublevers
    13. 13. VARIATION: FOCUS (Reduce need for Variation) EXTERNALIZ ATION(Reduc e burden of variation) DESIGN (Reduce cost of variation) INNOVATION (Improve effectiveness of variation) products products strategic alliances flexibility transfer policies geographies franchising partitioning localization repositioning verticals user adaptation platforms recombination metrics segments networking modularity transformation Variation: Changes in Products, Policies, Positioning and Metrics
    14. 14. Even standardized products must be varied a great deal. Example: Adapting Windows to different languages such as Arabic, which flows from right to left. Products
    15. 15. Policies are used in an attempt to strike a balance between internal consistency and the external environment. Example: Lincoln electric has been able to succeed in environments where piecework (paying workers based on the number of units they produce) both is and isn’t allowed. Policies
    16. 16. Repositioning involves broadly changing the entire position of a product. Example: Coke in India and China are sold for lower margins at higher volumes. Repositioning
    17. 17. This requires the adjustment of profitability targets to different levels across countries. Example: Whirpool remains present in Europe despite it being a less profitable market than the US. Metrics
    18. 18. VARIATION: FOCUS (Reduce need for Variation) EXTERNALIZ ATION(Reduc e burden of variation) DESIGN (Reduce cost of variation) INNOVATION (Improve effectiveness of variation) products products strategic alliances flexibility transfer policies geographies franchising partitioning localization repositioning verticals user adaptation platforms recombination metrics segments networking modularity transformation Adaptation: Levers and Sublevers
    19. 19. Sublevers: • Product Focus • Geographic Focus • Vertical Focus • Segment Focus Focus: Reduce Need for Variation
    20. 20. Firms focus on specific geographies, products, or vertical stages. This reduces the need for variation and keeps complexity under control. Focus
    21. 21. Globally there are significant differences in the amount of variation required in specific product categories. Example: Unlike many other films, nature and science documentaries are successful at crossing borders because they possess very few cultural/political biases. Product Focus
    22. 22. Restriction to a specific geographic scope can increase success by minimizing coordination problems, distances, and differences. Example: Cognizant, a software services firm, differentiates itself by tailoring its consulting services towards companies needs in specific international markets. Geographic Focus
    23. 23. Firms focus only on specific activities in their value chains in order to simplify cross-border operations. Example: Brunswick, a retailer in recreational boats, began by first by selling only engines internationally, not entire boats. Vertical Focus
    24. 24. Firms only target specific segments. Example: Zara focuses on fashion-sensitive consumers by capitalizing on quick inventory turnovers. Segment Focus
    25. 25. VARIATION: FOCUS (Reduce need for Variation) EXTERNALIZ ATION(Reduc e burden of variation) DESIGN (Reduce cost of variation) INNOVATION (Improve effectiveness of variation) products products strategic alliances flexibility transfer policies geographies franchising partitioning localization repositioning verticals user adaptation platforms recombination metrics segments networking modularity transformation Adaptation: Levers and Sublevers
    26. 26. Sublevers: • Strategic Alliances • Franchising • Adaptation and Networking Externalization: Reduce burden of Variation
    27. 27. Externalization occurs when firms develop joint ventures and partnerships in order to reduce internal burden. Externalization
    28. 28. Strategic alliances provide firms with access to local knowledge and connections otherwise inaccessible in distant markets. Example: The pharmaceutical company Lilly set up standardized management for all of its alliances, making use of a database that held all the information from each alliance, a standardized training program, and an annual survey of each alliance. Strategic Alliances
    29. 29. Franchising helps chains relax their internal growth constraints in order to increase local responsiveness and achieve innovation. Example: Fast-food chains share knowledge extensively in both directions. Franchising
    30. 30. This requires the involvement of customers and other third parties, i.e. through the use of mashups. Example: Linux’s open source software that individual developers are free to add to. User Adaptation and Networking
    31. 31. VARIATION: FOCUS (Reduce need for Variation) EXTERNALIZ ATION(Reduc e burden of variation) DESIGN (Reduce cost of variation) INNOVATION (Improve effectiveness of variation) products products strategic alliances flexibility transfer policies geographies franchising partitioning localization repositioning verticals user adaptation platforms recombination metrics segments networking modularity transformation Adaptation: Levers and Sublevers
    32. 32. Sublevers: • Flexibility • Partitioning • Platforms • Modularity Design: Reduce Cost of Variation
    33. 33. Design works to reduce the cost of, rather than need, for variation. Design
    34. 34. Flexibility requires the design of business systems that reduce fixed costs attributed to variation. Example: Amazon sells online; has a large variety of products without shelf space constraints. Flexibility
    35. 35. Partitioning requires firms to separate the elements which are variable from those that are integral to their business strategy. Example: McDonald’s food variety across cultures. Partitioning
    36. 36. Platforms are utilized as a method of cost-effective customization. Example: McDonald’s creation of combi oven that can cook several varieties of dishes at once. Platforms
    37. 37. Modularity defines the standardized interfaces between all key elements in order for firms to mix and match. Example: Computer production- different parts are worked on independently by specialized groups. Modularity
    38. 38. VARIATION: FOCUS (Reduce need for Variation) EXTERNALIZ ATION(Reduc e burden of variation) DESIGN (Reduce cost of variation) INNOVATION (Improve effectiveness of variation) products products strategic alliances flexibility transfer policies geographies franchising partitioning localization repositioning verticals user adaptation platforms recombination metrics segments networking modularity transformation Adaptation: Levers and Sublevers
    39. 39. Sublevers: • Transfer • Localization • Recombination • Transformation Innovation: Improve Effectiveness of Variation
    40. 40. Innovation works to improve the effectiveness of adaptation efforts through the creation of new products or ideas. Innovation
    41. 41. Transferring innovations from one part of the world to another. Example: The expansion of Disney’s US model to create Latin Disney. Transfer
    42. 42. Localization involves explicit focus on innovation in a target geography. Example: Shampoos in India are designed for extremely price sensitive consumers. Localization
    43. 43. Melding elements of the parent’s business model with opportunities that arise in new contexts. Example: The Indian version of “Who wants to be a millionaire” was successful because of the parent companies’ knowledge of local preferences and production expertise. Recombination
    44. 44. Transformation reduces the need for adaptation by seeking to shape/transform local environments in which the firm operates. Example: Starbucks transformed US coffee drinkers to expect a high quality experience. Transformation
    45. 45. VARIATION: FOCUS (Reduce need for Variation) EXTERNALIZ ATION(Reduc e burden of variation) DESIGN (Reduce cost of variation) INNOVATION (Improve effectiveness of variation) products products strategic alliances flexibility transfer policies geographies franchising partitioning localization repositioning verticals user adaptation platforms recombination metrics segments networking modularity transformation Adaptation: Levers and Sublevers
    46. 46. Adaptation cannot be applied in isolation; aggregation and arbitrage strategies must also be applied simultaneously. Applying Adaptation
    47. 47. • Introduction to ADAPTATION as a Global Strategy – Overview – Importance – Purpose – Difficulties – Example: Home Appliances • ADAPTATION Tools – Levers and Sublevers – Competitive Strategies • Applying ADAPTATION Summary - Adaptation
    48. 48. Recommended Reading
    49. 49. Over 1 Million views from more than 100 countries www.BuddingMarkets.com Prof. Sameer Mathur Over 250 presentations on Marketing Top 1% most viewed

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