Global Companies: Spread Value Chain across the world

Source raw materials where ever cheapest, move to countries where cost of factors of production is lowest & finally send to most affluent markets.eg Sony,GM,Auto/Truck Cos,P&G Major revenue from global mkts, spread of Equity around the world. Focus more on standard products,mass customisation

Trans national Companies (new coinage)

Global in operations but tend to be more responsive. Think Global , Act Local

Evolution of Global business:

International firmExporting products from home base ,overseas. Large scale import of raw materials for home consumption eg M&M exporting tractors to USA, Tata-trucks

Multinational firm (MNC)

Large scale setting of production(distribution) facilities abroad Substantial revenues from overseas operations. eg Oil Cos-BP,Mobil-. Exploration,refining,distribution Unilever,Philips Multi Domestic Cos- MNCs operating more like national Cos

eg

Hindusthan Unilever,ITC(Tobacco,Paper,Hotels,Life style, Agro while parent BAT focussed only on Tobacco). These Cos while drawing Technology,Mkt support for practical purposes work independently

Cultural Diversity & the Organisation:

Hofestede Model - Power- Distance,Individualism vs Collectivism, Masculanity-Feminism, Uncertainity Avoidance Halls classification- Low/High Context Cultures Managerial Staffing - Ethnocentric(home bias),Geocentric(local/regional) Poly centric(whichever best) approaches Industrial Relations - Socialist,communist trade unions anti MNC s MNCs exploit Labor,MNCS hand in glove with the Govt Expatriates - Cost 3to4 times home pay-foreign allowance, double establishment,children schooling, working wives reluctance to shift. Ideal tenure3to4years

Differences in Financial,Accounting,Taxation ,Legal systems in countries of operations Taxation uncertainities(eg GAAR-Vodofone) Stricter Enforcement(eg USA-Insider Trading) Operating profit/Capital repatriation issues Managing Currency fluctuations: Transactional/translational (A/C)Exposures Hedging.MNCs equalise revenues in TRIAD(N.America,Europe,Asia Pacific with equal GDP) Netting( Internal or thru Banking arrangements)

Product
Standardisation Vs Adaptation- a balancing act (eg industrial items Gillette ,computers,Play station,cannon cameras , Applle I Podvs packaged products(food,detergents etc ) vs services) Standardisaion gives Economy of scale,better positioning,advt. Adaptation -New Zealand Diary adds,ginger,pappya flavor to milk in China -TV channels adopt sub titling,Google-multi script,Simpson US Serial Samshoor in Saudi Arabia -Unilever reduces salt,fat,sugar in health conscious countries -GmM offers Cadillac/Saturn for North America,Europe(Opel,Vauxhall,China Buick Legal requirements Product information, product safety (eg FDA in USA),product liability ,environmental issues,IPR Mkt. Segmentation (dividing mkts into homogeneous clusters, looking for similar customer value curves , californisation of mkts,Levis,MTV target youth who follow global media)-US firms focus on Latin America,with common Spanish language,cultural heritage Product Introduction- cascading (saturate Affluent mkts first& laterenter low cost emerging mkts) vs sprinkler approach ie simultaneous launch of new products(I_Pad)

Pricing
cost plus(affluent mkts like Japan for US Premium goods), mkt competitive price,incremental pricing,below cost (attractDumping duties-WTO). Inter Division transfer pricing-Arms Length Principle Differential pricing across neighbouring countries can lead to grey Mkts Location of value adding facilities in Free trade blocks can reduce duties.

 Product Standardisation Vs Adaptation- a balancing act (eg industrial items Gillette ,computers,Play station,cannon cameras , Applle I Podvs packaged products(food,detergents etc ) vs services) Standardisaion gives Economy of scale,better positioning,advt. Adaptation -New Zealand Diary adds,ginger,pappya flavor to milk in China -TV channels adopt sub titling,Google-multi script,Simpson US Serial, Samshoor in Saudi Arabia -Unilever reduces salt,fat,sugar in health conscious countries -GmM offers Cadillac/Saturn for North America,Europe(Opel,Vauxhall,China Buick Legal requirements Product information, product safety (eg FDA in USA),product liability ,environmental issues,IPR

Mkt. Segmentation (dividing mkts into homogeneous clusters, looking for similar customer value curves , californisation of mkts,Levis,MTV target youth who follow global media)-US firms focus on Latin America,with common Spanish language,cultural heritage Product Introduction- cascading (saturate Affluent mkts first& later enter low cost emerging mkts) vs sprinkler approach ie simultaneous launch of new products(I_Pad)

Global Branding & Product Devolopment

Global branding, a global positioning strategy-eg coco cola, Pepsi,IBM,GE,Sony,Honda-provides a sense of trust&confidence in purchase decisions. Brands bring Loyalty, higher premium prices by increasing leveragewith distributors,customers(Brand Value Coco Cola-67.5 Billion US Dollars,Micro soft-60,Nokia26,Toyota24,Sony 10. It is not possible to followone offering-One world strategy-eg Fords world carMondeo failed to get acceptance of mkts,regulatory authorities. On the contrary,Ever ready Battery consolidated national brands-Ucar,Wonder,Mazda into Energizer. While managers prefer to build a national brand first&then internationalise,,the preferred approach is to build Global brand in the first stage itself. Toyota,Honda buld Accord,Corrolla on standard platforms wiyth Modular approach, GM standardising some best platforms from its subsidaries. Ose of Global teams for

Product
Standardisation Vs Adaptation- a balancing act (eg industrial items Gillette ,computers,Play station,cannon cameras , Applle I Podvs packaged products(food,detergents etc ) vs services) Standardisaion gives Economy of scale,better positioning,advt. Adaptation -New Zealand Diary adds,ginger,pappya flavor to milk in China -TV channels adopt sub titling,Google-multi script,Simpson US Serial Samshoor in Saudi Arabia -Unilever reduces salt,fat,sugar in health conscious countries -GmM offers Cadillac/Saturn for North America,Europe(Opel,Vauxhall,China Buick Legal requirements Product information, product safety (eg FDA in USA),product liability ,environmental issues,IPR Mkt. Segmentation (dividing mkts into homogeneous clusters, looking for similar customer value curves , californisation of mkts,Levis,MTV target youth who follow global media)-US firms focus on Latin America,with common Spanish language,cultural heritage Product Introduction- cascading (saturate Affluent mkts first& laterenter low cost emerging mkts) vs sprinkler approach ie simultaneous launch of new products(I_Pad)

Pricing
cost plus(affluent mkts like Japan for US Premium goods), mkt competitive price,incremental pricing,below cost (attractDumping duties-WTO). Inter Division transfer pricing-Arms Length Principle Differential pricing across neighbouring countries can lead to grey Mkts(US/Canada for drugs) Location of value adding facilities in Free trade blocks can reduce duties.

Pricing Flexible cost plus(affluent mkts like Japan for US Premium goods), mkt competitive price,incremental pricing,below cost (attractDumping duties-WTO). Inter Division transfer pricing-Arms Length Principle Differential pricing across neighbouring countries can lead to grey Mkts(US/Canada for drugs) Location of value adding facilities in Free trade blocks can reduce duties Price escalation due to local currency depreciationMNCs try to reduce Channel length eg Direct marketing

Choice of media - While penetration of TV is much higher in China compared to India,reverse is the case for News print-Level of litracy in target Country.Mexico prefers TV,Kuwait,Norway the Print.In Bolivia,preference is for bill boards. Advertising must respect cultural sensitivism. Eg Nike ran an ad. Produced for US audience in China depictingNBA Basket ball starLebron battling & defeating &finally defeating a coputr generated Chinese Kung Fu master. This was not liked in China & the ad was banned in China. On the Contrary,Benetton,Italian Clothing manufacturer ran a highly successful United Colors of Benetton,featuring racial harmony,successfully world wide. Choice of ad. Agency between a home country agency with international experience,a local agency based in the target mkt. or a global agency with local office.

Promotional Activities: In Europe,For example Portugal, Spain permit virtually every type of promotion(coupons , samples,gifts( Germany,Norway ,Switzerland are very restrictive. Global Account Mgmt: (GAM) GAM refers to to servicing a key Global customer in a consistent & standardized manner with uniform prices eg Walmart is a key Global account for P&G International distribution : Can be from engaging intermediaries (full stosking distributors) to establishing fully owned Mkt subsidiaries.(FDI), the latter giving greater control & closeness to customers.Japan has long channel length(no. of intermediaries0 Where feasible companies adaopt direct mkt. to reduce channel length ,which only adds to the cost.

Ethical &safety Issues: Mcdonald sources coffee only fromgrowers certified by Rain forest alliance who ensure sustainable income for farmers. Nestle is a member of Fair Trade movement offering growers above mkt coffee prices to its growers, Quant computrs inexpensive (100 Dollars) computers for children in poor countries. Bicycles are specially designed for heavy loads in rugged roads. Motorola devoloped low cost sets for emerging mkts. Disposal of waste/toxic products at end of product life cycle. EUs Waste Elect.&Electronic Equipment(WEEE) law makes it obligatory for manufacturers to take back eqpt. at end of life &recycle.European law restricts use lead ,mercury in electronic eqpt.

Exporting Thru intermediaries or fully owned distribution chain Licensing Bell Lab (AT&T) licensed Transistor technology to Sony for commercial exploitation Propreitary drug manufacture for specific mkts or contract manufacturing for global distribution Technical Collaboration ,Technical Consortium (Projects) Franchising(Services) Joint Ventures (for complementary skills,meet regulatory requirements for local partner-Bhumiputra in Malaysia,India(Hero Honda,Maruti Suziki).China Acqusitions,Cross border mergers 100% Green field subsidiaries

Mkt. variables target mkt .segment,merchandise mix,promotional needs,global ormultidomestic strategies,distributional differences. Study of consumption patterns,income elasticity(increas in income via vis incresae in consumption,Gap Analysis(segments not responding) Out sourcing,off shoring Supply chain gets extended(tariff/non tariff barriers),longer transit,delays at custom points.