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Introduction to global strategic planning and market expansion


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Introduction to global strategic planning and market expansion

  1. 1. Introduction to Global Strategic Planning &Global Market Expansion <br />
  2. 2. Global Marketing<br />“…the world is becoming more homogenous…”<br />“...distinctions between national markets are fading and may disappear…”<br />
  3. 3. Global Marketing Evolution<br />Core Business Strategy<br />Develop CoreBusiness Strategy<br />Internationalizethe Strategy<br />Country<br />A<br />Country<br />B<br />Country<br />C<br />Country<br />D<br />Globalizethe Strategy<br />Source: Reprinted from “Global Strategy… In a World of Nations?” by George S. Yip, Sloan Management Review 31 (Fall 1989): 30, by permission of the publisher. Copyright 1989 by Sloan Management Review Association. All rights reserved.<br />
  4. 4. Globalization Drivers<br />Market Factors<br />new consumer groups, developed infrastructures, globalization of distribution channels, cross-border retail alliances<br />Cost Factors<br />avoiding cost inefficiencies and duplicated efforts<br />Environmental Factors<br />reduced governmental barriers, rapid technological evolution<br />Competitive Factors<br />rapid product innovation, introduction, distribution<br />
  5. 5. The Strategic Planning Process<br />Understanding and adjusting the core strategy begins with a clear definition of the business for which the strategy is to be developed.<br />The Strategic Business Unit<br />Based on product market similarities<br />Similar needs or wants to be met<br />Similar end user customers to be targeted<br />Similar products or services used to meet needs of specific customers<br />
  6. 6. The Strategic Planning Process<br />Global Strategy Formulation<br />Assessment and Adjustment of Core Strategy<br />Market/Competitive Analysis - Internal Analysis<br />Formulation of Global Strategy<br />Choice of Target Countries, Segments, and Competitive Strategy<br />Developmentof Global Marketing Program<br />Implementation<br />Organizational Structure - Control<br />
  7. 7. Market and Competitive Analysis<br />First, understand the structure of the global market industry; the common features of customer requirements and choice factors.<br />Internal analysis<br />Examine the readiness and capability of the firm to undertake strategic moves with its current resources.<br />
  8. 8. Formulating Global Marketing Strategy<br />Formulation begins with a series of strategic decisions<br />Choice of Competitive Strategy<br />Cost leadership<br />Differentiation<br />Focus<br />Country-Market Choice<br />Concentration or diversification<br />Factors in country markets selection<br />The stand-alone attractiveness of the market<br />Global strategic importance of the market<br />Possible synergies offered by the market<br />
  9. 9. Competitive Strategies<br />Source of Competitive Advantage<br />Competitive<br />Scope<br />Low Cost<br />Differentiation<br />CostLeadership<br />BroadDifferentiation<br />Industry-wide<br />Single Segment<br />Focus<br />SOURCE: Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1998), chapter 1.<br />
  10. 10. Bases for Global Market Segmentation<br />Bases for InternationalMarket Segmentation<br />Environmental<br />Variables<br />Marketing<br />Management<br />Variables<br />Geographic<br />Variables<br />Political<br />Variables<br />Economic<br />Variables<br />Cultural<br />Variables<br />Promotion<br />Variables<br />Product<br />Variables<br />Price<br />Variables<br />Distribution<br />Variables<br />
  11. 11. Global Marketing Program Development<br />Development Decisions<br />Product offering<br />The degree of standardization and adaptation in the product offering.<br />The marketing approach<br />The marketing program beyond the product variable.<br />The location and extent of value-adding activities<br />Pooling production.<br />Exploiting factor costs or capabilities.<br />Strategic alliances.<br />Concurrent engineering.<br />Competitive moves to be made<br />Cross-subsidization using resources accumulated in one market to wage a competitive battle in another.<br />
  12. 12. Implementing Global Marketing<br />Success will come from a balance between local and regional / global concerns.<br />“Think globally, act locally” is the operative phrase for global marketers competing in country markets.<br />Product choices should consider individual markets as well as transfer products from one region to another.<br />
  13. 13. Global Marketing Pitfalls to Avoid<br />Insufficient local market research.<br />The tendency to over standardize the product.<br />Inflexibility in planning and implementation.<br />The “Not-Invented-Here” syndrome (NIH).<br />How to avoid the NIH syndrome<br />Ensure that local managers participate in the development of global brand marketing strategies.<br />Encourage local managers to develop ideas for regional or global use.<br />
  14. 14. Localizing Global Marketing<br />Achieving a balance between in-country managers and global product managers at corporate headquarters will require action to develop and implement a global strategy.<br />
  15. 15. Localizing Global Marketing<br />Management processes<br />Enhance the global transfer of communications.<br />Interchange personnel to gain experience abroad.<br />Headquarters should coordinate and leverage resources.<br />Permit local managers to develop their own programs within defined parameters Maintain a product portfolio that includes local as well as regional or global brands.<br />Allow local managers control over marketing budgets to respond to local customer needs and counter global competition.<br />
  16. 16. Localizing Global Marketing<br />Organization structures<br />The shift to global account management.<br />Corporate culture<br />The world is not one single market.<br />Plan and execute programs on a worldwide basis.<br />A global Identity favors no specific country.<br />
  17. 17. Foreign Investments<br />Firms invest to enter markets or assure themselves of sources of supply.<br />Foreign direct investment<br />An equity investment to create or expand a permanent interest in a foreign enterprise.<br />Portfolio investment<br />The purchase of stocks and bonds internationally.<br />Major foreign investors<br />More than 45,000 multinational corporations with 280,000 affiliates globally.<br />The terms “foreign” and “domestic” may no longer apply.<br />
  18. 18. Reasons for Foreign Direct Investment<br />Marketing factors<br />Growth and profit motivations.<br />Circumventing government-erected barriers to trade.<br />Access to low-cost resources and supply.<br />Local customers preference for domestic goods and services.<br />Attempts to obtain low-cost resources and ensure their supply.<br />
  19. 19. Categories of International Firms<br />Resource seekers<br />are searching for natural and human resources.<br />Market seekers<br />are searching for better opportunities to enter or expand within markets.<br />Efficiency seekers<br />are attempting to obtain the most economic sources of production.<br />
  20. 20. Reasons for Foreign Direct Investment<br />Derived demand<br />results when businesses move abroad and encourage their suppliers to follow them, creating chain or pattern of direct investment in a market.<br />Government incentives<br />Fiscal incentives<br />tax holidays, allowances, credits and rebates.<br />Financial incentives<br />special funding for land or buildings, loans and guarantees, wage subsidies.<br />Non-financial incentives<br />guaranteed purchases, protective tariffs, import quotas, local content requirements, infrastructure.<br />
  21. 21. Foreign Direct Investors<br />Positive perspectives<br />Bring in capital, economic activity, and employment.<br />Transfer technology and managerial skills.<br />Competition, market choice, and competitiveness are enhanced.<br />Negative perspectives<br />Drain resources from host countries.<br />Starve smaller capital markets.<br />Discourage local technology development.<br />Bring in outmoded technology.<br />Create new competition for local firms.<br />
  22. 22. Types of Ownership<br />Ownership patterns may be based on past experiences with similar ownership models.<br />Full ownership<br />Full control, full assumption of all risks.<br />May be desirable, but is not necessary for success internationally.<br />Joint ventures<br />Shared control, shared investment risks.<br />Reasons for joint ventures:<br />governmental pressure to join with local partners.<br />mutually beneficial commercial considerations in sharing markets, pooling resources, and local suppliers.<br />
  23. 23. Joint Ventures<br />Recommendations for joint ventures<br /><ul><li>Find the right partner.
  24. 24. Negotiate the joint venture agreement carefully.
  25. 25. Maintain flexibility to adjust to changing market conditions.</li></ul>ADVANTAGES<br />Pooling of resources<br />Better relationships with local organizations<br />Knowledge the partner brings of the local market<br />Minimizing exposure risk of long-term capital<br />Maximizing leverage of invested capital<br />DISADVANTAGES<br />Different levels of control are permitted or required<br />Difficulty in maintaining the relationship<br />Disagreements over business decisions<br />Disagreements over profit accumulation, and distribution (profit repatriation)<br />
  26. 26. Types of Ownership… continued<br />Strategic alliances<br />“…more than the traditional customer-vendor relationship, but less than an outright acquisition.”<br />Government consortia<br />Public-private relationship in a specific project.<br />Typically government supported or subsidized.<br />
  27. 27. Complementary Strengths Create Value<br />SOURCES: “Portable Technology Takes the Next Step: Electronics You Can Wear,”The Wall Street Journal, August 22, 2000, B1, B4; Joel Bleeke and David Ernst, “Is Your Strategic Alliance Really a Sale?” Harvard Business Review 73 (January-February 1995); 97-105; and Melanie Wells, “Coca-Cola Proclaims Nesta Time for CAA.” Advertising Age, January 30, 1995, 2 See also;;;; and<br />
  28. 28. Contractual Arrangements<br />Cross marketing<br />The parties agree to carry out activities which are complementary and non-competitive.<br />Contract manufacturing<br />An arrangement that allows one part to outsourcing product manufacturing to another party while retaining control over research and development. <br />Management contracting<br />A supplier furnishes an integrated service (e.g., turnkey operation) internally to a client that is functionally important to the client. <br />
  29. 29. Management Contracting Advantages<br />CLIENT ADVANTAGES<br />Provide organizational skills not locally available.<br />Immediate availability of skills.<br />Management assistance and support that is not available locally.<br />SUPPLIER ADVANTAGES<br />Lower risk because no equity capital is at stake.<br />Exercise large amounts of operational control.<br />The strategic advantage of being on the “inside”.<br />Opportunity to commercialize “know-how”.<br />Using experienced staff to offset business fluctuations.<br />
  30. 30. Management Contracting Risks<br />Risks to the client<br />Over-dependence on the supplier.<br />Loss of control to the supplier.<br />Risks to the contractor<br />Bidding without fully detailed insight into actual costs of delivering the service.<br />The effects of the loss or termination of the contract and resulting personnel problems.<br />