GLOBAL MARKETING STRATEGIES

MKT 3130 Lecture 12

1. Multi-domestic Vs Global Industries and Strategies

The nature of product competition shapes the extent to which MNCs integrate production in different countries. According to Porter (1986), in a Global Industry, competition is highly internationalised, therefore MNCs will adopt a global strategy to capture the linkages across borders. In a Multi-domestic industry competition is largely local or national, therefore MNCs will adopt a multi-domestic strategy and will make little attempt to generate linkages between operations in different countries.

Objectives

By the end of this lecture students should be able to: Identify and explain the international marketing strategies that firms adopt Understand and analyse the factors that influence the choice of the international strategy Identify and explain the competitive strategies adopted by firms worldwide

1. Multi-domestic Industry

Multi-domestic Industry: Is an industry in which the competitive position of the firm is independent of its position in other markets Thus the international strategy the firm adopts is the multi-domestic strategy

1. Multi-domestic Strategy
Multi-domestic strategy:
Is a strategy in which the MNC manages its overseas subsidiaries as independent businesses, where the activities of one overseas subsidiary do not affect the activities of another subsidiary. Thus, A MNC competes with many strategies, each tailored to a particular market. MNCs generally follow a multi-domestic strategy when the local market demands a high degree of adaptation of the firms products and processes. Thus, the MNC gives primary importance to national responsiveness. In this case, there is little interdependence between the procurement, manufacturing, or marketing activities across the MNC.

2. Global Industry

Global Industry:
Those

industries where a firms competitive position in one country is affected by and interdependent with its industry position in other countries. It is an industry in which competitive advantage can be achieved by integrating and leveraging operations on a worldwide scale

2. Global Strategy
In a global strategy, the MNC uses the resources developed or acquired in one part of the firm to create competitive advantage in other parts of the firm. Overseas subsidiaries are managed as interdependent businesses. This strategy requires a high level of integration, coordination and control across the MNCs subsidiaries A critical difference between a multi-domestic and global strategy is the level of interdependence or resource exchange among the organizational subunits.

2. Global Strategy

Four major forces determine the globalisation potential of industry:

Market Drivers Cost Drivers Government Drivers Competitive Drivers

Industry Globalization Drivers (see Exhibit 8-1):

2. Global Strategy

2. Global Strategy
Market

Drivers

1. Common customer needs 2. Global customers and channels 3. Lead countries

2. Global Strategy
Cost

Drivers

1. Global economies of scale and scope 2. Global sourcing efficiencies 3. Favorable logistics 4. Difference in country costs 5. High product development costs 6. Fast-changing technology

2. Global Strategy

Government Drivers
1. Favorable trade policies 2. Compatible technical standards 3. World Trading Regulations 4. High growth/low labor cost developing countries 5. Deregulation/privatization of industries

Competitive Drivers
1. High

exports and imports 2. Competitors from different continents and countries 3. Interdependent countries 4. Globalized competitors

2. Global Strategy
Competitive Structure: the firm faces direct competition from other competitors in the market and indirect competition from suppliers, customer and substitute products. Nature of Competitive Industry Structure (see Exhibit 8-2):

Industry competitors Potential entrants

Bargaining power of suppliers

Bargaining power of buyers Threats of substitute products or services

2. Global Strategy

2. Global Strategy

Competitive Advantage:

A firm has a competitive advantage when it is able to deliver the same benefits as competitors but at a lower cost or deliver benefits that exceed those of competing products.

To prolong the period of such a competitive advantage the firm must develop a strategy that is difficult for its competitors to imitate.

Generic Strategies for Creating Competitive Advantage

Competitive Strategies:
Cost

Leadership Product Differentiation Niche Strategy (Focused Differentiation)

a. Cost Leadership

The firm that builds its competitive advantage on economies of scale is known as one using a cost leadership strategy. Based on a firms position as the industrys low-cost producer Must construct the most efficient facilities Must obtain the largest market share so that its per unit cost is the lowest in the industry Only works if barriers exist that prevent competitors from achieving the same low costs In the 1970s and early 1980s, many Japanese firms became cost leaders in such industries as automobile and consumer electronics.
Return

b. Product Differentiation

Product that has an actual or perceived uniqueness in a broad market has a differentiation advantage Extremely effective for defending market position Extremely effective for obtaining aboveaverage financial returns; unique products command a premium price.

Return

c. Niche Strategy (Focused Differentiation)

Smaller firms may pursue a limited differentiation strategy by keeping a niche in the market Firms using a niche strategy focus exclusively on highly specialized segment of the market and try to achieve a dominant position in that segment. The product only has actual uniqueness but it also has a very narrow target market Results from a better understanding of customers wants and desires Example High-end audio equipment
Return

2. Global Strategy

Gaining Competitive Advantage

First-Mover Advantage

vs. F-M

Disadvantage
First

mover advantage: the first company to enter a country market has the best chance of becoming the market leader

Competitor-focused Approach

Customer-focused Approach

2. Global Strategy

Interdependency:
Interdependency

of modern companies Example: Global computer industry Governments also play a larger role, affecting parts of the firms strategy.

3. Global Marketing Strategy

Benefits of Global Marketing:

Cost

Reduction Improved Products and Program Effectiveness Enhanced Customer Preference Increased Competitive Advantage

Limits to Global Marketing:

Standardization

vs. adaptation issues Global integration vs. local responsiveness Scale vs. sensitivity

4. Regionalization of Global Marketing Strategy

Regional strategies are the cross-subsidization of market share battles in pursuit of regional production, branding, and distribution advantages.
Cross-subsidization of markets refers to MNCs using profits gained in a market where they have a strong competitive position to beef up their competitive position in a market where they are struggling to gain a foothold. E.g. Michelin used its strong position profit base in Europe to attack the home market of Goodyear in the USA.

4. Regionalization of Global Marketing Strategy

Issues

in regionalization of global marketing strategy:

Cross-Subsidization

of Markets Identification of Weak Market Segments Use of Lead Market Concept Marketing Strategies for Emerging Markets

5. Competitive Analysis

SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis (see Exhibit 8-5) A SWOT analysis divides the information into two main categories: internal and external factors. Based on SWOT analysis, marketing executives can analyze the firms competitive position relative to its competitors and can construct alternative strategies. The aim of any SWOT analysis should be to isolate the key issues that will be important to the future of the firm and that will be addressed by subsequent marketing strategy.

5. Competitive Analysis