Multinational Corporation Behavior - Term Paper Example

 Multinational Corporation Behavior Analysis Introduction Multinational corporations are entities that manage productions as well as deliverer services in several countries where they conduct their businesses. They are also referred to as multinational enterprises or transnational corporations. They therefore have their management headquarters in one single country, which is their home country, while operating their businesses in many other nations, other than their own (Boyd 1990). Many multinational corporations have manufacturing plants, different branches and offices in different nations from where their original and main center of operations is situated. Some have even huge amount of budgets that can surpass some of their nations GDPs and can therefore without doubt have a great influence in their local as well as the global economies. They therefore have a great role in international relations and globalization (Ari 1994). This particular presentation aims at evaluating multinational behavior through contrasting and similar features that exist between Sony and LG Companies within the electronic industry. The analysis will focus on examining the strategies applied by the two companies on their cross boarder activities. LG Corporation, a South Korean based multinational corporation was established in 1947.The company however acquired the name LG officially in 1995 as this was to enable it better compete well in the western market. Its founder was known as Koo In-Hwoi.LG is the world’s largest multinational corporation dealing with electronics, telecommunication products and chemicals as well as managing additional brands such as LG Electronics, LG Chem, LG Display and LG Telecom. This covers more than 80 countries globally (Paul 1966). Sony Corporation on the other hand is a Japanese multinational corporation based in Minato, Japan. It is the fifth largest multinational corporation and deals with electronics in addition to information technology goods used by its local consumers as well as the international market. Initiated in 1946 by Masaru Ibuka along with Akio Morita, Sony acted as the parent corporation and the central business unit of the Sony Group (Landro &Yumiko 1998). Unpredictable customer demands and competitive forces within the local and cross border business arenas frequently exert more pressure on marketing which demands better marketing strategies and strategic implementations. The sequence time from product development, to product launch, for a winning go-to-market strategy, should leave no room for errors within multinational operations (Doole & Lowe 1994). Some of the similarities that exist between the two companies in terms of strategies applied in cross boarder activities include; Promotion Strategies Sony and LG multinational corporations have developed several similar strategies on their cross border business operation processes. This is basically putting the customer at the center of their promotions. Both companies employ intensive promotion strategies as a way of adapting their products and strategies to the different local as well as cross border markets. For instance they both use customer attractive adverting slogans such; LG – Life good and Sony – Make believe which influence customer’s perception of the products. The advertising strategies of LG, for example, are organized and executed by LG, Korea using their Pakistan office keeping in mind their international or cross border approach as the theme line. And since it’s a multinational brand, their advertising expenses are budgeted in manner that all their products get promoted. They however have different agents who deal with promoting different other products such televisions, cellphones, computer monitors and other new electronics. As a multinational company, their tactics are to divert finances from strong markets to weaker or upcoming markets within their cross border branches (Paul 1966). Most of LG’s products are therefore designed as well as being implemented through their regional agents as their main sales and promotion tactic. They also recommend good incentives to their respective dealers who in turn promote the products among various customers therefore acquiring their targeted volumes within their major markets (Paul 1966). Sony as well has been able to promote its own products by employing the same strategies. Sony also has regional agents who are used as the sales and promotion agents. In addition they also target weaker or upcoming markets within their cross border branches. The company has also used the media such as televisions adverts . Through television advertisement, they have been able promote some of their products their Sony Wega and Bravia televisions. They also target certain television programs such as sports and other series and also own their own television channel. Through these, Sony has been able to promote its games such as play station 2 and 3 employing the use of sports such as soccer in the English Premier League. They also use other social events such as beauty contests to promote and other Medias such as newspapers and magazines to promote varieties of their products to their potential customers (Lyons 2006). Product Strategies Both LG and Sony multinational corporations have products that are developed in relation with the international standards. Their products carry all the essential features that serve the functional requirements of the various products. LG products are basically for individuals from both the upper, lower and the middle class. LG vision statement is based on the fact that if any average family posess LG Products then the products should make life better. Another LG objective is provision of world class products for people of all classes in order for them to enjoy luxury that is real. Based on the fact that LG is a Korean brand and most imports are derived from Korea, the products have exceptional advanced features which have a huge demand essentially in markets of developed nations. LG also ascertains that any particular product they display on the market has characteristics of being resilient enough to last for several years; LG also ensures that they offer services that are problem free to their customers. It provides for instance with its refrigerators, the company gives a five years compressor guarantee and a service in spare parts under normal use for one year. Given that LG is an international producer of home appliances, it makes certain that their product have to attain their exact quality standard. Thus, when the product is delivered to the client, it has to attain the customer's expectations (Tyagi & kumar 2004). Sony on the other hand bases similar product strategies on the brand name, product functionalities, guarantees, product quality, packaging, safety and other support services. Their products just like with LG are however manipulated according to a given target market demand. This is because customers look for new things and features forcing the respective companies to come up with better products than the existing ones. Sony produces and stocks variety of products varying from entertainment, electronic devices and games. These include televisions, projectors, mobile phones, home theatre music systems, car entertainment systems, home audio and video and many other accessories. Market Expansion Another basic similarity between the two companies in terms of product strategies is linked to the aspect of new productive innovation in order to expand markets, both companies have over the years been putting efforts and resource to try and capture the market through newly innovated products. The impact of this is that both vendors end up competing for the software’s that are required to support the market, which can bring unfavorable impacts on future product expansion. Another basic impact that faces both Companies is that new companies or vendors emerge into the market such as VTR, who posses no standards, therefore affecting the markets of both companies (Görg & Strobl 2002). As illustrated by the curve below; With the emergence of fresh or new companies into the market both Sony and LG loss the lengthy era of economic profits they have been enjoying. The entry of new firms into the market curves the formation of a horizontal demand curve as illustrated above. As a result each individual company shifts downward by bringing down their prices. The final impact is that eventually both firms will only realize normal profits or what is referred to as Zero economic profits. Ari (1994) highlights that in order for these companies to avoid the occurrence of such as situation; it might actually be beneficial if both companies (Sony and LG) cooperated more. Extensive Publicity and Public Relations Both LG and Sony employ the use of a broad set of communication activities employed to create and maintain good relationship with employees, shareholder, media, investors, governments, suppliers as well as the society in general. Using their respective websites, they have been able to provide their personal contacts to their customers who may require any form of information from the companies. As a result of this, they are able to form a mutual relationship with their customers and make certain that it satisfies the desires and demands of all their potential customers. Unpleasant situations that may come up due to negative measures may precipitate bad public responses for both companies. To reduce the negative consequences of such circumstances resulting to unfavorable coverage, both the companies have put in place policies and procedures to manage such public relation problems (Paul 1966). The companies also get involved in various projects within their countries of operation. For instance they enter into partnerships with local marketing companies and also government projects. This assists them to develop a mutual relationship with the existing government and local firms which further creates venues for market expansion There are various contrasting strategies as well applied both by LG and Sony Multinational Corporations that assists them adapt their products and strategies to the characteristics of different local and cross border market operations in their quest for success (Paul 1966). Pricing Strategy The pricing strategies of LG and Sony multinational Corporations displays some differences as strategies for their local and cross border business operations are concerned. The LG strategy is cost plus the fixed mark to cater for the company’s gross profit. And because they take into the interest of both the upper and middle classes, their 90 per cent dealers are mainly found within the major towns only. Their pricing policy is determined by the import costs plus the gross profit (Anne 2005). With Sony, pricing decisions are often made after consultation has been done with the marketing management. Pricing in this case acts as a marketing mix that is unpredictable and which can be changed quickly. Price variables like discounts, dealer and retail prices, , allowances, credit terms etc. manipulate the marketing strategy process , as price serves as a key issue that influences the assessment of value by the customers. Customers relate product prices to various aspects such as quality and therefore Sony as a multinational lay emphasis on product quality, it often sell its products employing price ranging from moderately-high to high-prices, depending on the targeted customers in addition to the use. Sony for example has a series of laptops as one of their products which they classify according to, user style, mobility, purpose, and performance and each has a subsequent price. VAIO SZ series, for example, boast of executive excellence and premier mobility. This laptop was designed by Sony mainly targeting business persons and executives who are always travelling. The laptop has a built-in hybrid disk drive in addition to a motion eye camera and Bluetooth well-matched headphones with functions for video conferencing and increasing mobility (Lyons 2006). Distribution Strategies Decisions concerning distribution channel aims at making the existing product to be in sufficient quantities in areas where customers are usually anticipated to shop in order to satisfy their requirements. Depending on the products nature, decisions on marketing management should put into place intensive or selective and exclusive, network of distribution, at the same time select the suitable dealers or wholesalers. LG products are imported to various markets all over the world and they rarely maintain any loose stock after finishing. They base their distribution on the past sales forecast as well as the feedback of the various dealers with regards to the likely demand, they import from the headquarters. Dealers are told to keep adequate stocks 4-6 weeks after they are finished. Rather they believe in replacement of dealer stock according to their sales. This means dealers stock in most cases remains within a given limit and doesn't go beyond the 6 week level (Tyagi & kumar 2004). LG is credited for having over 300 dealers both in big and small towns. LG also utilizes a policy that entails provision of retail prices that are uniformed to consumers all over the countries of operation. In addition the company also caters for suppliers transportation costs. Big LG warehouses are also established by the company act as supply centers that are used by respective dealers in various countries. . Sony on the other hand, being a company that places itself as a supplier of durable and high quality products, applies selective product distribution from selective dealers such as SONY World. Other than applying the selective distribution method, Sony has what is known as the grey-markets in places such as India and other countries where a practice of rigorous market coverage is employed. The products in such markets usually do not contain all the features and benefits which Sony offers such as warranty and guarantee. Sony distributes its products through the use of various distribution channels. It employs the use of the zero-level channel, one level channel as well as the two-level channel. The one level channel for example has been used in India as a distribution channel. This implies that, customer buys their Sony product from those retailers who are known by Sony, and the retailers get the products straight from the company itself. Sony has also been able to go further ahead helping its customers via the internet to access the closest retail shops within their respective regions. Consequently, they find it easy to purchase the Sony products they need. All they need is to visit the website for example www.sony.co.ke/section /shop or products for instance and the location. Then it will show all the nearest retail shop as well as the products available (Lyons 2006). Factors that Influence product Design and Development In various ways, strategies for developing and designing of products of the two companies are quite diverse. Sony designing strategy is grounded or backed by experience and intuition rather that market analysis and research. Regularly the rational involves finding a market for a particular product after it develops, however Sony basic strategy is by listening to the needs of the customers and then later innovating as opposed to study the market for the purpose of expansion (Lyons 2006).LG product design and development on the other hand is based on market analysis and also the evaluation of customers needs. The designing team at LG takes greater responsibility on ensuring that the products developed fit within current market and production pattern (Ann 2005). Conclusion Multinational Companies cross border activities should adopt effective strategies that can facilitated the continued existence and survival of he organization within the foreign market. LG and Sony being in the electronic industries apply common strategies such as Extensive Publicity and Public Relations, product strategies and promotion strategies. The two companies also use different distribution, pricing and factors that influence the designing of new products. The analysis above display the typical characteristics applied by multinational companies in order to optimize their operations within the global markets. Bibliography Ari, K, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293. Anne-Birte S,2005 ‘’LG announces new marketing strategy’’ Ultimate Middle East business resource Boyd, B, 1990, "Corporate Linkages and Organizational Environment: A Test of the Resource Doole, I & Lowe, 1994, International marketing strategy: analysis, development, and Implementation. Routledge Görg, H & Strobl, E, 2002. "Multinational Companies and Indigenous Development: An Empirical Analysis,", C.E.P.R. Discussion Papers. Landro, L &Yumiko, Rubinfein, E, 1998, "A Changing Sony Aims to Own the 'Software' That Its Products Need," Wall Street Journal. Lyons, N, 2006, The Sony Vision, New York, Crown. Paul 1966, Multinational Strategic management, Routledge . (Sony ) Paul, J, 1966, International Marketing, McGraw-Hill.pgs 249-359(LG) Tyagi, C.L & kumar, A, 2004, Consumer Behavior, Atlantic Publishers & Distributors.pgs-36-8. Read More