MANAGING GLOBAL MARKETS

MANAGING GLOBAL MARKETS

ORGANIZING AND MONITORING INTERNATIONAL MARKETS EFFORTS
Literature on the subject of multinational organization

development has in the past questioned whether structure influenced strategy and vice versa

The question of corporate culture whether the firm is

ethnocentric (home country orientation), polycentric (host country orientation), regicentric ( region orientation) or geocentric (world orientation), can also be a barrier as this will influence the degree of freedom granted to the subsidiaries and affiliates in their reporting procedures to head office.

 An ethnocentric oriented company

MANAGING GLOBAL MARKETS Contd.

attaches little value to international sales whereas a polycentric orientation means that each country subsidiary has independences of action.

It is only with a regiocentric or geocentric

orientation that the company starts to think of integrated marketing strategies.

RELEVANT CONTROL SYSTEM

The boston consulting group (BCG) product portfolio matrix

High

Low Problem Children

Market growth rate

High

Stars

Cash Cows

Dogs

Low

Relative Market Share BCG business portfolio matrix implications for investment
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RELEVANT CONTROL SYSTEM Contd.

STEPS
1. For each product determine the annual

growth rate in the market. Normally 10% or more are considered High and anything less, low.
2. Determine the relative market share of

each product by comparing with the share of the largest competitor, and express as a ratio or above is considered High
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CLASSIFICATION
1. DOGS Cash traps (do not generate a

significant cash flow)

2. CASH COWS Generate large amount of cash

over and above that required to keep the product in this sector.
3. PROBLEM CHILDREN Products that

consume cash resources at alarming rates. (Cash drain)

4. STARS Can generate a relatively large cash

flow but not matched or exceeded by the out flow of cash (modest net CF)
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NB
The objective of an organization is to achieve a balanced in the portfolio few or no dogs, some problem children, some stars and some cash cows. A company should ensure sufficient net positive cash flow from its cash cows to fund its stars and turn them eventually into cash cows Problem children can also be turned into stars

LIMITATIONS
Over simplication: Two factors are not enough. USING MCKINSEY / GENERAL ELECTRICS MULTIFACTOR PORTFOLIO MATRIX (GE) In the GE matrix product/ strategy business units are evaluated using the two dimensions of market attractiveness and competitive position.
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GEs Product / Market Attractiveness

GEs Competitive Position Sectors

- Size - Growth rates

- Market Share - Share of growth rate

- Competitive diversity and - Product quality structure - Historical profit margin - Technological requirements - Social impacts - Environment impacts - Legal impacts - Energy Requirements
-

Brand reputation

- Distribution network - Promotional effectiveness - Productive Efficiency - Unit costs - R & D Performance - Managerial Personnel
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TYPE A -

THE DIRECT TYPE

The most senior staff of the company have a direct relationship with the foreign subsidiary. Multinationals such as the Swedish SKF ball-bearing company have traditionally been organized along these functional lines which transcend national boundaries. This means that home-based functional managers are responsible or functional activities internationally.

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TYPE B -

The relationship is mediated through local managers who may have international, regional or nations titles. The company sees more diversity in its markets than its products and so may choose to group area and technical specialists under this geographical grouping.

THE GEOGRAPHICAL TYPE

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TYPE C

THE PRODUCT TYPE

Product group managers have direct control over the subsidiaries operating in their product area. Standardization is ensured but at the cost of duplication of many head office services and a loss of coordination over subsidiary activities

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TYPE D -

THE MATRIX TYPE

The matrix organization in which the subsidiary mangers report along both the product group, and geographical lines, sometimes even functional lines as well. A country manager at head office is responsible for channeling all communication between head office and the subsidiary abroad. On the one hand, this creates the benefit of belongingness for the foreign subsidiary to make this feasible. Theoretically, a matrix organization should have created responsiveness, efficiency within he organization and the creation of direct reporting channels of communication.

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TYPE E -

THE PROJECT TYPE

The application to the total organization of the project organization devised for large-scale assembly operations like aircraft building. The company is organized into a series of project groups which bring together staff drawn from any relevant functional area and are constantly changing.

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Optimum divisionalization thus involves:

2. 3. 4. 5. 6.

1. The identification of separable economic

activities within the firm According quasi autonomous standing, usually of a profit-centre nature of each Monitoring the efficiency performance of each division Awarding incentives Allocating cash flows to high yield uses Strategic planning.

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