Amar KJR Nayak/IB/XIMB

Amar KJR Nayak/IB/XIMB

The Globalization of Markets

Theodore Levitt

Key Concerns:

How to customize products for the demands of new markets?

Differences in culture and values among nations

(Month of Ramadan, Bank Lending rates, etc.)


Differences in tastes of people in different regions / nations

Customization of goods / services for different

market segments

Different character of people and companies under the influence of new technology


Vindication of Model T

General Rule!

Lower the cost and price

Improve the quality & reliability

Henry Ford – Production of Model T

Need for Global imagination


Strategic issues

Knowing a lot about many things v/s knowing everything about one great thing

Give customers what he says he wants or what he

can take

Lower cost international product – patronage expands exponentially


Global Corporation accepts and adjusts to the differences only reluctantly, after relentlessly testing their immutability, and after trying in various ways to circumvent and reshape them


Summary

Converging commonalityDevelopments in technology

From customizing items to offering globally standardized products

Only Global companies will achieve long-term success by Concentrating on what everyone

wants rather than Cater to details of what everyone thinks they might like


A strategy!!

Offer everyone simultaneously high-quality, more or less standardized products at optimally low prices

Samsung’s (Washing Machines, Refrigerators, TVs, etc)


A strategy!!

Examples? Global Corporations will seek sensibly to force suitably standardized products

and practices on the entire globe!!

Prof. Amar KJR Nayak

Global Production Strategies

Factors that influence international production

Trade Restrictions

Import duties

Exchange Rates

Opportunity for international businesses to specialize and integrate manufacturing

plants

US Companies in W. Europe in 1970s

A process of rationalization &International value addition

Nissan, Seimens, Ford Motors



International Division of Labor

Production of standardized products moving to low cost regions

Ex.: Chemicals, Drugs, Automobiles, Textiles, etc

Critical functions like R&D

concentrating in a few advanced countries

Production Cost Reduction Methods

India, US, Japan


Production Cost Reduction MethodsGlobal Bench Marks

United States JapanMarket Research

Product Characteristics

Design

Engineering

Supplier Pricing

Cost

If cost is too high, return to design phase

Manufacturing

Periodic Cost Reduction

Market Research

Product Characteristics

Planned Selling PriceLess Desired Profit

Target Cost

Design Engineering Supplier Pricing

Target costs for each component force marketers, designers, and engineers from all departments and suppliers to struggle

and negotiate trade-offs

Manufacturing

Continuous Cost Reduction


Four production strategies

Global concentrated production

Host market production

Product specialization for a global or regional market

Transnational vertical integration of production

Business Strategy

European – Merchandize: Colonization

American – Technology: IPLC

Japanese – Mass Production (M&S, T&H)

Case Analysis

STANDARDIZATION STRATEGY

Strategic Maneuvering and Mass market Dynamics

Cusumano, Mylonadis, and Rosenbloom

The Transformation


A case of home videocassette recorders (VCRs)

SONY JVC/MG

Product Betamax VHS

Introduction 1975 1976

Quality (Technically)

Superior Not Superior


SONY JVC/MG

Size Compact Bigger

in Size

Market Position

(End of 1980s)

34 66

Market Position

(2000)

0 100

How did this happen?

Home-Video Families and World Color TV Shares, 1976-1977

Home-Video Families and World Color TV Shares, 1976-1977

1976 World Color TV Sales

Company Format 1974 VCR Commitments

Rank Share (%)

Sony Beta Betamax prototype 3 7.4

Sanyo ‘’ V-Code in Japan 5 6.2

Toshiba ‘’ V-Code in Japan 6 5.8

Zenith ‘’ none 4 6.4

Total Beta 25.8



Rank Share (%)

Matsushita VHS VX-100 prototype 1 12.7

Hitachi ‘’ none 7 5.6

RCA ‘’ Selectavision prototype

8 5.2

Sharp ‘’ none 10 3.1

Total VHS 26.6



Rank Share (%)

Philips Philips N-1500 in Europe

2 11.5

Grunding ‘’ N-1500 in Europe

9 3.8

Total Philips 15.3

VCR Production and Format Shares


VCR Production and Format Shares, 1975-1984 (in percent)

1975 1976 1977 1978 1979 1980

BETA Group

Sony 100 56 51 28 24 22

Others - 5 5 12 15 11

Subtotal: 100 61 56 40 39 34



1975 1976 1977 1978 1979 1980

VHS Group

Matsushita - 29 27 36 28 29

JVC - 9 15 19 22 18

Others - 1 2 5 11 19

Subtotal: - 39 44 60 61 66


VCR Production and Format Shares, 1975-1984 ( in percent)

1981 1982 1983 1984 ….. 1989

BETA Group

Sony 18 14 12 9

Sanyo 9 10 8 6

Toshiba 4 4 4 3

Others 1 1 2 2

Subtotal: 32 28 25 20



1981 1982 1983 1984 ….. 1989

VHS Group

Matsushita 28 27 29 25

JVC 19 20 16 17

Hitachi 10 10 11 15

Sharp 7 7 9 9

Mitsubishi 3 3 3 4

Sanyo - 3 4 5

Others 2 2 2 5

Subtotal: 68 72 75 80 100

VCRs: The Comparisons

Incompatibility


Incompatibility in the two systems

Tape handling mechanisms

Cassette Size

Coding schemes for their video signals

Recording-Playing Time Comparison



Year/Month BETA VHS

1975/5 1 hr. (Sony)

1976/10 2 hr. (JVC)

1977/3 2 hr. (Sony)

1977/10 4 hr.

(Matsushita)

1978/10 3 hr. (Sony)

1979/3 4.5 hr. (Sony)



Year/Month BETA VHS

1979/8 6 hr.

(Matsushita)

1979/8 4 hr. (JVC)

1979/12 6 hr. (JVC)

1982/3 8 hr. (Sony)

1982/9 5 hr. (Sony)

Special Effects Comparison



Sony Introduction Date (Year/Month)

Matsushita JVC

Wireless Remote 1977/3* 1977/6 1979/6

1 / 2 –Speed Machine 1977/3* 1977/6 1979/8

Slow/Still 1979/3 1978/7 1977/12*

Portable VCR 1978/9 1980/2 1978/2*

1 / 3-Speed Machine 1979/3* 1979/8 1979/12



Sony Introduction Date (Year/Month)

Matsushita JVC

Scan/Slow/Still 1979/3* 1980/6 1979/8

Stereo Recording 1980/7 1979/8* 1979/8*

Hi-Fi 1983/4* 1983/5 1983/11

One-Unit Camera Recorder

1983/7* 1985/1 1984/3

* Marks the first to introduce the feature.

Group Alignments


Group Alignments (1983-1984)

Note: Suppliers indicated by initials(J = JVC, Ma = Matsushita, H = Hitachi, Mi = Mitsubishi, T= Tokyo Sanyo,

S = Sony, To = Toshiba, Sa = Sanyo, P = Philips, G = Grundig)

Japan U. S. Europe

VHS GROUP (40)

JVC Magnavox (Ma) Blaupunkt (Ma)

Matsushita Sylvania (Ma) Zaba (J)

Hitachi Curtis Mathes (Ma) Nordmende (J)

Mitsubishi J.C. Penny (Ma) Telefunken (J)

Sharp GE (Ma) SEL )J)

Tokyo Sanyo RCA (H) Thorn-EMI (J)


Japan U. S. Europe

Brother (Mi) Sears (H) Thomson-Brandt (J)

Ricoh (H) Zenith (J) Granada (H)

Tokyo Juki (H) Hangard (H)

Canon (Ma) Sarolla (H)

Asahi Optical (H) Fisher (T)

Olympus (Ma) Luxer (Mi)




Japan U. S. Europe

Nikon (Ma)

Akai Trio (J)

Sansui (J)

Clarion (J)

Teac (J)

Japan Columbia (H)

Funai









Japan U. S. Europe

BETA GROUP (12)

Sony Zenith (S) Kneekerman (Sa)

Sanyo Sears (Sa) Fisher (Sa)

Toshiba Rank (To)

NEC

General (To)

Aiwa

Pioneer (S)





Japan U. S. Europe

V – 2000 (7) Philips

Grunding

Siemens (G)

ITT (G)

Loewe Opta (G)

Korting (P)

B & O (P)

VCR Sales by Country and Format

VCR Sales by Country and Format (1983)

Unit Sales (millions)

VHS %

Beta %

V–2000 %

USA 4.1 75 25 0

Japan 3.4 70 30 0

Britain 2.3 74 24 2

W. Germany 1.5 60 20 20

France 0.4 70 20 10

Italy 0.2 60 20 20

Above Totals 11.9 72 25 3

Summary:Strategic Moves


Strategic Moves of Matsushita Group

Complement Strengths in Product Development /Mass Production

Managerial Attitude to work with Partners

Make the video cassette players (VCP) compatible with Video Cassette recorders

Respond to Market Demand(play duration of VCP)


Standardize and promote the production of VHS formatted cassettes

Collaborate with video rental shops to promote VHS cassette players

Tie-up with other players in the value chain of the product both in the in home market and foreign

markets

Standardize product through increased production and increased sales in home and overseas markets:

Critical Volume to Market Standardization

Is the Strategy applicable to you?

Business Strategy – Summary

European – Merchandize: Colonization

American – Technology: IPLC

Japanese – Mass Production (M&S, T&H)

Asian & Indian - ?

Amar KJR Nayak/IB/XIMB

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