Competing in Global Markets

Group 3Vijay Madanu – 17Ankur Rathi – 37Vishal Roge – 38Sachin Shah – 42

Deepak Singh – 47Nikhil Thadani - 52

Structure

• Globalization Factors - Overview

• Global Strategic Models – Porter & Yip

• Blue Ocean and Red Ocean Strategy

• Case Analysis

Forces driving global integration

• Globalization of Economies – Emerging markets• Fierce local competition• Syndication of Technology – Manufacturing Efficiency• Trade pacts and bilateral ties between economies• Conducive business / monetary policies promoting

international trade• Growing literacy rate• Rise in Per capita income

Industry Globalization Drivers

• Market Drivers– Common Customer Needs– Global Customers & Channels– Marketing Mix

• Cost Drivers– Global Economies of Scale & Scope– Steep Learning & Experience Curve Effects– Favorable Logistics– Shortening PLC, Rising R&D & Development Costs– Fast Changing Technology

Industry Globalization Drivers

• Government Drivers– Favorable Trade Policies– Compatible Technical Standards– Common Marketing Regulations– Government as a Customer

• Competitive Drivers– Presence of Global Competitors– Presence of Strong Local Competitors

Issues Faced…

• Government intervention• Infrastructure bottlenecks• Legal environment• Financial Regulations• Civil Disturbances• Environmental Issues

Advantages of going Global

• Scalability – production, sourcing, R&D

• Learning from different markets

• Marketing and Distribution

• Investor / Consumer Confidence

Challenge

• Converting global advantage in to local advantage

• Enriching experience from local markets to global scale

Essentials of competing in global markets

• Effectively managing change and transition• Cultural diversity• Design flexible organizational structures• Compliances – Environment, Safety

Key Elements for International Competition

• Competitive Advantage– The set of unique features of

a company and its products that are perceived by the target market as significant and superior to the competition.

• Sustainable Competitive Advantage– An advantage that cannot be copied by the competition

International Strategy

• An International Strategy is a strategy through which the firm sells its goods or services outside its domestic market.

• Reasons for implementing an international strategy– International markets yield potential new opportunities– To extend a product life cycle– To secure needed resources

Opportunities and Outcomes of International Strategy

Increased Market Size

Return on Investment

Economies of Scale and Learning

Advantage in Location

International Business –level

Strategy

Multi-domestic Strategy

Global Strategy

Transnational Strategy

Exporting

Licensing

Strategic Alliances

Acquisitions

Establishment of a new subsidary

Management Problems and

Risk

Better Performance

Innovation

Management Problems and

Risk

Identify International Opportunities

Strategic Competitiveness Outcomes

Explore Resources

& Capabilities

Use of Core Competenc

eModes of

Entry

International Strategies

• International Business-Level Strategy– Global cost leadership– Global differentiation– Global segmentation

• International Corporate-Level Strategy– Global strategy– Multi-domestic strategy– Transnational strategy

International Business-Level Strategy

• Global cost leadership– focuses on being the lowest cost producer of a product globally– Takes advantage of global economies of scale & high volume sales

world-wide– Eg: Walmart

• Global differentiation– Create a superior product or change customer perception of the

product in order to raise price on a global scale– Often the basis of this strategy is a strong brand name– Eg: Apple

• Global segmentation– Global version of a focused strategy– Can be either be global cost leadership or global differentiation– Targets a single segment on a worldwide basis– Eg. Zara

Multidomestic Strategy

Transnational StrategyGlobal Strategy

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Need for Local Responsiveness

International Corporate-Level Strategy

• Global strategy– Firm offers standardized products across country markets, with

competitive strategy being dictated by the head office– Emphasizes economies of scale– Less responsive to local markets– Eg Coke, Pepsi

• Multi-domestic strategy– Strategic and operating decisions are decentralized to the strategic

business unit in each country– Maximizes local responsiveness– Eg. Unilever, P&G

• Transnational strategy– Firm seeks to achieve both global efficiency and local responsiveness– Eg. Dell

Modes of Entry

Types of Entry CharacteristicsExporting High cost, low controlLicensing Low cost, low risk, little control, low returns

Strategic alliances Shared costs, shared resources, shared risks, problems of integration

AcquisitionQuick access to new market, high cost, complex negotiations, problems of merging with domestic operations

Wholly owned subsidiary

Complex, often costly, time consuming, high risk, maximum control, potential above-average returns

Strategic Competitiveness Outcomes

• International Diversification and returns– Greater economies of scale and learning along

with greater innovation, help produce above-average returns.

• International Diversification and innovation– Provides larger market to gain more and faster

returns from investments in innovation– May generate resources necessary to sustain a

large-scale R&D program

Risks in International Environment

• Political risk– Domestic instability– Foreign conflict– Protectionism: Tariff, Quota, Subsidy, Cartel– Corruption: Bribery, Extortion, Grease payments

• Economic risk

Porter and Multidomesticity

• According to Porter, a company is:– Multidomestic if competition in each nation is

independent– Global if the competition is global

Basis of Global Strategies: 2 Models

• Porter’s • Yip’s

Porter’s Global Generic Strategies

• Protected markets• National responsiveness• Global cost leadership• Global differentiation• Global segmentation

Protected Markets

• Focusing on competing in countries where that particular government protects or favors the business

National Responsiveness

• Focuses on adapting strategy to each local market

Red and Blue Ocean Strategy

• Create uncontested market space• Make the competition irrelevant• Create and capture demand• Break the value – cost trade off• Align the whole system of firms activities with its strategic choice of

differentiation and cost

Blue Ocean Strategy

• Complete in existing market space• Beat the competition• Exploit existing demand• Make the value-cost trade off• Align the whole system of firms activities with its strategic choice of

differentiation or cost

Red Ocean Strategy

•Which factors industry takes for granted that should be eliminated

Eliminate

•Which factors should be reduced well below the industry’s standard

Reduce

•Which factors should be raised well above the industry standard

Raise

•Which factors should be created that the industry has never offered

Create

Four Action Framework

Formulation Principles•Reconstruct market boundaries•Focus on big picture and not numbers•Reach beyond existing demand•Get the strategic sequence right

Execution Principles• Overcome key organizational

hurdles• Build execution in to strategy

6 principles of Blue Ocean Strategy

Case Analysis

MTV v/s Channel V

Case Overview

• Entered in India via STAR’s satellite feed in 1991• Rupert Murdoch acquired STAR in 1993 and MTV parted ways

over some commercial disagreements.• This led to launch of Channel V• MTV launched again in 1995 – focused on youth and common

brand image• Stiff competition on distribution figures• While MTV had a upper hand in attracting advertisers and

revenue, Channel V was better off recovering cost by low and smart investment

Launch Approach

• MTV wasn’t adopting product to local tastes and requirements – Global approach

• Channel V on other hand went for localization with artists and programming– VJ’s– Local Artists

Strategic Approach

• MTV – Multidomestic– Localized content but certain common values that projected the brand

in a certain form for consumers ‘MTV Generation’– Positioning – Music Channel– Global Network

• Channel V - National Responsiveness Strategy– Total localization, positioned themselves differently in each market – Changed Positioning in 1999 – Positioned as a youth channel– Regional network

India• MTV

– Focused on roadshows and Dance parties– Music entertainment– Mass base

• Channel V – Operational liberty (National Responsive Strategy) – International Content and music– Focused on classes– Coke V Live Concert, Music awards with local, national and

international artists– 10 concerts in two years (97-98)– Long term advertising deals

China

• MTV– Televised Award ceremonies were very important– MTV announced Music Honours in association with CCTV –

days before Channel V planned event– Lack of procedural clearances delayed the project by 3

months

• Channel V– Successful music awards even that got 500 million viewers

across Asia / 3 million votes across 20 categories

Strategy – reach and distribution

• MTV – Concentrated on Syndication / Fixed slot and

claimed more reach amongst the TG

• Channel V– Focused on 24 hour relay of channel through

satellite and cable – Illegal satellite and cable made it difficult for ad

sales

Going beyond

• With advertising and reach being limited it was necessary for both the channels to move out and compete beyond television audiences

– Syndication– Licensing– Merchandising– Royalties

Licensing and Merchandising

• MTV - Global– Globally recognized brand and logo helped in creating tailor made

music eg. Unplugged series, MTV Alternate Nation etc– Branded Merchandise like clothing, books, backpacks etc– MTV branded Pagers– Different pricing for different markets – eg. Philippines and Singapore– Scores heavily on brand perception over Channel V

• Channel V – India– Albums & T-shirts – more for promotion– Kazakhstan – Deal with ALMA TV for beaming it to 50000 homes– Poor logo – Lack of brand equity as compared to MTV

Others

• Better operations to reduce over head costs – Channel V overhauled their system to Digital and increased efficiency

• MTV launched website with Tricast Ltd– Allowing video, audio downloads and news updates– Chinese Version– Plans to monetize inventory– Sell merchandise– Collect more TG data for sales support– 4 times the traffic of Channel V– Live Webcast – Billboard Asian Music conference