Global Strategies as a Successful Business Strategy - Coursework Example

Introduction This assignment will look at the evidence supporting uniform global strategies as a successful business strategy in an international market place and adapting strategies to national preferences/differences in international operations, comparing and contrasting the strengths and weaknesses of both approaches in what is a growing global economy. This paper concentrate on strategies for various national perspectives, acknowledging different countries of company origin have historically implemented strategies in different ways, such as the Japanese centralised hubs, American based R&D and capital support and European decentralised federations. One of the key considerations, when looking at global strategies is the state of the global economy. There has been much debate as to whether globalisation consists of one single global market. It is necessary to think whether a uniform global strategy is one, which is 100% uniform and standardised, or just its key elements. It must acknowledge that companies that operate in overseas markets do so in order to expand their businesses and reach as well as stave off competition. "Even businesses whose focus has traditionally been on domestic markets are finding they must compete across borders not just to prosper but also to survive". (Kanso and Nelson, 2002, p.87) Regarding terminology, it is important to acknowledge that different academics may use the same terminology for different types of companies; confusion can arise with different companies & markets, which interpret slightly differently depending on the author. Competitive Advantage An organisation's global strategy(s) is dependent upon where the competitive advantage(s) for the product(s) or service(s) lies. This links win with Thompson, Strickland and Gamble (2007, p227) belief that there are four strategic issues relevant to competing across national boundaries. Issues are, whether to customise a company is offering in each different country to the taste of products. Implement the basic competitor strategy in all countries or fit them to specific markets and conditions depending on competition circumstances. Locate company's production facility(s), distribution, and customer service operation in order to gain greatest location advantages, and lastly share company's resource, capabilities in different country, to ensure competitive advantage. These are the factors to consider developing a global strategy. When considering uniform versus localised strategy is the transferability of a product's/service's/company's competitive advantage(s), means identifying the factors behind the competitive advantage. This can be location specific such as low cost labour, the quality of infrastructure, or technological, or brand name or a company's internal resources and capabilities. Empirical evidence suggests that it is usually easy to recreate technological, brand name and most other organisational capability advantages in a new international location, given enough time. Uniform strategy, standardisation, and national adaptation In adapting a uniform global strategy, there are many associated cost savings and potential benefits. One of the key concepts of a uniform strategy is standardisation and the ability to standardise not only products but also to transfer other competitive advantages. Theodore Levitt was a renowned famous supporter of standardisation and one uniform global market. Standardisation can be an easy and quick success as products/services stay the same. Many argue that it is important to have some sort of standardisation of a product when entering a new international market in order to have an existing competitive advantage, but there is much debate whether this applies in all, some, or few circumstances. Theodore Levitt believed that organisations that operate and compete on only a national basis are vulnerable to attack from companies that treat the world as a single global market. His main argument surrounds scales of economies and companies producing standardised products (at a competitive cost) to earn the rewards from these scales of economy. This angle of argument goes some way to supporting the view held by many that there is a reduction in national and regional preferences largely due to the effects globalisation. Levitt cites Gillette as an example company whose products are often standardised across world markets due to the similarities in product requirement and availability, i.e. little regional or nation requirements for razors and their ancillary products. Many successful multinational companies adapt a uniform strategy of standardisation. Companies such as McDonald's, Coca-Cola, Pepsi-Cola, Hollywood and Levi jeans all transgress globally and indeed many of these products are sold just about everywhere and are welcomed in equal measure. It is important that although in many cases the product or service is standardised, the marketing, communication, and logistics strategies may have adapted for specific regional, local, or national markets. A good example, demonstrating the processes of standardisation and national adaptation is Unilever's globally branded cleaning product Cif. Up until 2001 Cif was, know as Vim and then Jif in the UK, Ireland, Netherlands, Hong King, Australia, New Zealand and many Nordic countries. The name Jif was adapted rather than Cif because of the worry the pronunciation of Cif sounded too much like syphilis in English. However, in an attempt to standardise the product, it changed its name in 2001 in the UK, Ireland, Netherlands, and Hong Kong to the original name Cif. It is clear that previous historic company set-ups are now converging, with previously centralised Japanese corporations and previously decentralised European and US corporations now both coming together. An example of this is Ford Europe, which concentrates on the design of small cars, whereas Detroit concentrates on the design of large cars. Vignali (2001, p110) summarises that McDonald's is a 'global' company, combining both elements of globalisation and international adaptation. McDonald's have been very successful with their 'globalisation' strategy and now use it as their continuing strategy for expanding into new international markets. These examples show adaptation and localisation on a small mainly product scale compared with the standardised brand name and image. This is also true for Nestl''s Kt-Kit chocolate bar which has the same branding and name as in the UK but is produced with a higher cocoa content and of smaller size for adaptation for the far east market. Theodore Levitt's critics point out that the flexible manufacturing techniques available today make it easier to produce many different product versions, tailored to particular countries. For example, Haagen-Dazs developed a flavour of ice cream solely for Argentina, "dulce de leche" (sweet as milk). One year later Haagen-Dazs rolled this flavour out across the globe becoming one of the top ten flavours in America. ( Kotler and Keller, 2006, p.681) Due to a lack of understanding of the local culture, Products and companies failed in new market. Coca-Cola withdrawal two litre bottle in Spain because very few Spanish owned refrigerators large enough to store the bottle. Hallmark cards failed when they introduced to France, as the French prefer to write their own sentiments in cards. Hamel and Prahalad further pointing to the strategic advantages of an international scope. They argue that varying competitive conditions in different countries allows the global company to use its strong position in some national markets to improve its position in countries where it is weak. The global competitor can use cross-subsidisation; this therefore allows for cutting prices in the short term to gain greater market share. Complete adaptation is not an optimal strategy as if a product is completely adapted for the local market; the company will not be able to take advantages of any scales of economy, marketing knowledge, and information acquired in other markets. However, adaptation does help evaluate and effectively use national differences for the company's benefit. Powers & Loyka's (2007, p.692) study on global product standardisation found that some but not all market and industry variables have an impact on global product standardisation. It is clear that almost every company applies some national adaptation or localisations. In some cases, the overall strategy is uniform with product or marketing adaptation. Cross border synergies, overseas strategy, and exporting Cross-border co-ordination and synergies can be an invaluable for servicing overseas markets, allowing response to and attacking competitors. International companies can realise through cross-border synergies compensation for additional expenses of operating in multiple countries. Where vertically linked business units work closely together, exchanging and joining knowledge, activities, equipment and personnel, can allow quicker learning and more efficiency than if the business units were independent. This is especially true where they initiate joint R&D projects and collaborate on business process improvement. Indeed, there are many cases where companies collaborate with their competitors in order to improve chances of success. Empirical evidence suggests that cross-border synergies are a way of easing the step into operating in overseas markets and has many benefits. The key question is to what extent they tie in with a uniform strategy or national adaptation. In general, the synergies allow cost savings and efficiency on resources but there is still likely to be an element of national adaptation required in order to be successful in the new market. The less a product, its marketing, and distribution adjusted to local market conditions, the easier it is to service overseas market by direct exporting. Conversely, the more a product needs to be adapted to meet local market requirements, the more the company will need access to additional resources in order to be successful, supporting the economic argument of Theodore Levitt on the savings of scale of economies. The most important resources to succeed in overseas markets usually appear to be market information and distribution channels. Rather than invest directly to gain access to these, companies can look at other strategies to achieve this, such as the licensing of technology or brands, to form a joint venture with a local partner(s) or to franchise out a product/service. Until recently, companies would only go into India using a joint venture. This was due to the rule of the Indian government. When considering licensing or franchising strategies, it is likely to come down to whether the company's competitive advantage can be exploited directly through the market or not and if so how easily this can be achieved, taking into account the various cost and resource implications. Licensing can be a very cost effective strategy of exploiting overseas market in countries where property rights are legally enforceable then licensing is an attractive way of exploiting overseas with low investment costs. Franchising in a similar vein to licensing, allows a company to gain greater global presence without having to take as much of a risk with direct investment. Whether companies directly represent in countries or by agents, it is a major factor when developing and adapting a global/international strategy, this will influence the ability to standardise a company's strategy. Location for local advantage and transportability Another key consideration, looking to adapt a global/international strategy is the physical location situation. Often the location where a product produced is in a completely different location to where the product sold /marketed. A good example of this is the sportswear giant Nike, who perform R&D and product development in the US, manufacture shoe components in South Korea and Taiwan, have the sports shoes assembled in Taiwan, China, Thailand, Malaysia and the Philippines and then market and distribute their products predominantly in North America and Western Europe. Rationally one would think of selecting the best location for each activity. However, this ignores the potential advantages from locating activities near to one another. It is important to identify those activities where there are benefits in being close to each other, such as concurrent engineering, just in time scheduling, and the ability to respond swiftly to new market opportunities Transportability is another important factor when exporting. There are certain products that are difficult to transport long distances, such as perishable foods like fresh cream cakes. It can also be expensive to transport relative to the value of the product e.g. Cement and bricks. Cement is very much a standardised product and in theory could distribute from a central global location, however due to its weight it produced locally because the costs of transporting it outweigh any potential centralised distribution benefits. In these cases, exporting to a distant market is probably not feasible. Country of origin When considering the strengths and weaknesses of global business strategies, it is imperative to consider the existing and historical strategies that exist and their place of origin. Chris Bartlett (cited in Anon, 2007, p.R.15) calls the strategies and structures of multinationals "administrative heritage". His theory suggests that companies reflect the conditions that existed at the time of the commencement of their international development. He distinguishes between three types of multinational, firstly European multinationals, who can trace their origins back to colonisation, these companies are decentralised federations, and historically these companies had problems with interacting on a global scale because of poor transport links. National subsidiaries were therefore stand-alone entities that were almost completely self-sufficient in all functions in their national market; examples include Philips, Unilever, and Royal Dutch/Shell. Secondly, American multinationals, where companies were dominated by their American operation in the fields of technology and product development and relied on their American parent companies for technology and capital, however the overseas subsidiaries had a large amount of autonomy in every other way. Examples of this include Ford- German, Australian, and British subsidiaries up until the 1960s developed and manufactured their own automotive models for their domestic market. Thirdly, Japanese global corporations, whose operate extensive global integration with a dominant role for the Japanese bases for product development and manufacturing (centralised hubs). Success stories include those companies operating in the consumer electronic, cars, photocopiers, ships and cameras industries, however those involved in industries that need local adaptation have historically struggled, such as retailing, toiletries, and packaged foods. Bartlett's vision calls into question the presentation of universal theories without indicating the cultural assumptions on which they lay. De Wit and Meyer further support the origins of company's influence, "It is not unlikely that strategy theories have a strong cultural bias and therefore cannot be simply transferred from one national setting to another." (Dewit and Meyer (2004) p. xxi) Multinational and global corporations such as Sony; who although originate from Japan, show very little signs of being a Japanese company, many would argue rather that they are an international company with locations and presence world wide and perhaps therefore have very little influence today from Japanese business culture above that of Western Europe and the US. Bartlett and Ghoshal (cited in Anon, 2007, p.R.17) argue that by combining the advantages of the European decentralised federation and the Japanese centralised hub, a structure is produced which can exploit the benefits of both global integration and local adaption. This is they believe is key to success in the global market. Communications and Marketing When adapting a global strategy, many business aspects intertwined, many of which have been touched on earlier. Marketing and communication is the vehicle of promoting a new product or company in a new market. Around this, there is much discussion and differing of opinion. It is a case of deciding on, a marketing campaign that is aimed and bespoke for a national audience. Kotler has in the past has outlined four different communication approaches, which he believes are the available options - 1. Deliver same message with little variations. e.g. Esso- tiger in your tank'. 2. The same theme globally but adapt the copy to the local market. 3. Select the most appropriate from a global pool of adverts, e.g. Coca-Cola and Goodyear. 4. Create specific advertisements. (Kotler and Keller, 2006, p.682) Which one of these strategies or a permutation of more than to use will have to consider carefully and will have a major impact on a company's success in a national market. Media availability and appropriateness can differ considerably from country to country and media legislation such as limits on promotion, sales, coupons etc. These factors clearly make it very difficult to decide on adapting a uniform communications strategy for all countries, however where possible the cost savings will be significant. Kanso and Nelson's studies of the international market (2002, p.87), concluded that they have demonstrated that local concerns must be considered for successful international advertising campaigns. Where standardisation in marketing involves using the same marketing mix for the overall global market, differences of language culture, consumer preferences, laws and rules, marketing infrastructure and competition structure make the standardisation impossible. Van Heerden and Barter performed a study exploring the possibility of the convergence of world cultures and the localisation and standardisation of marketing strategies. Their findings indicated that culture plays a very important role in the formation of a global/international marketing strategy and were unable to conclude whether a standardised or a localised strategy is better (Heerden and Barter p43-44). Chung's (2005, p.1366-1367) study examining companies operations in the EU regions, specifically looking at cross-market scenarios, has raised some interesting findings. He suggests that although a complete similarity in market environments in the EU is never likely to occur, but that it is possible for companies to locate a group of country markets, which have shared similar market characteristics. Chung's study confirms that it is possible to locate a cross-market segment with similar consumer characteristics, despite consumers in the EU appearing to be divergent. Business opportunities and opportunities forms of standardisation in the EU may be different to those in countries from outside the EU, where pressures to adapt will be stronger. When looking at the USA, it is obviously one country, however like Europe it can be considered as several markets, for example Florida and to a lesser extent California have a high proportion of Spanish speakers and high Hispanic population. The newest research of activities (Alimiene and Kuvykaite, 2008, p.45) of companies in foreign markets reveals that companies that operate in foreign markets must have eclectic abilities and, at the same time, strive for integration, sensitivity, and learning on a global scale. When standardised place strategy is important to a company's operations, they must consider entering countries that use the same market entry mode as each other and a manager should consider adapting a standardised approach when the host markets are similar. Conclusion It has been argued that a reduction in regional and national preferences over the past ten years has led to a globalising of the international market place and that there is advantage in adapting uniformity and standardisation wherever possible, benefiting therefore from the associated scales of economies, however empirical evidence does suggest that most products require some adaptation. Further to the empirical evidence investigated, it is clear that there are many advantages to adapting a uniform global strategy, but its appropriateness must consider carefully. In industries where there is a lack of national differences in tastes and behaviours, it is possible that a uniform strategy and standardisation can use such as in the manufacture semiconductors, electronics, and motorcycles. Conversely, in other industries such where different tastes exist such as foods, beer, and children's clothing, adaptation and responsiveness to customer preference is of the utmost importance on order to achieve success. Which organisation model is adapted depends strongly on where competitive advantages exist or can be created and what the corporate strategy wishes to achieve. The preferred international management structure will depend largely upon the type of cross-border synergies that the strategists envisage. Complete uniform strategy and standardisation can be seen as being one extreme with total adaptation and localisation as the other. Most companies that operate in overseas markets will be placed somewhere between the two extremes and will use a mixture of both strategies. There is certainly string evidence to support global marketing; however, this does not necessarily mean that global standardisation is appropriate. It is clear that some form of adaptation is necessary for every company but to what extent to adapt is the major factor. Companies must be aware of the cultural, social, political and technological, environmental and legal limitations they face in new markets. On consideration of international strategy, companies must consider differences in market structures, customer needs, buying behaviour, distribution channel, media structure, infrastructure, supply structure and government regulation. The key is to get the right balance of standardisation and adaptation as well as global and local control in order to maintain or develop competitive advantages. Standardisation and adaptation should not bee seen as opposite approaches; instead, a company operating in foreign markets needs to determine the level of standardisation and adaptation. Standardisation involves less investment and minimal spend compared with local adaptation, therefore to standardise as far as possible will give the financial benefits of scales of economy, however it is important to know which elements to adapt and customise so as not to render the entire strategy unsuccessful Factors influencing the strategy adapted will include the size of the company and available resources to implement any strategy over a sustained period, whether a company is developed or less developed. Adaptation will not always be national adaptation and in some situations, nationality and a country's borders maybe superficial to the people and therefore adaptation will adapted to the local customs rather than that of a nation. Bibliography Alimiene, M. and Kuvykaite, R. (2008). Standardization/Adaptation of Marketing Solutions in Companies Operating in Foreign Markets: An Integrated Approach. Engineering Economic, Vol 1 (56), pp. 37-47. Anon. (2007). Master of Business Administration, Strategies in Action, 11th Ed. University of Leicester. Buchanan, D. and Huczynski, A. (2004). Organisational Behaviour - An introductory Text, 5th ed. Harlow, UK: Pearson Education, Chung, H, F, L. (2007). International marketing standardisation strategies analysis. Asia Pacific Journal of Marketing and Logistics, Vol 19 (2), pp. 145-167. Chung, H, F, L. (2005). An investigation of cross-market standardisation strategies - Experiences in the European Union. 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How can Marketing be Successfully Standardised for the European Market' European Journal of Marketing, Vol 23 (7), pp. 60-67. Ryans (Jnr), J, K., Griffith, D, A, and White, D, S. (2003). Standardisation/adaption of international of international marketing strategy. International Marketing Review, Vol 20 (6), pp588-603. Vignali, C. (2001). McDonald's "think global, act local" - the marketing mix. British Food Journal, Vol 103 (2), pp97-111. Thompson, A, A. Strickland A, J. and Gamble J, E. (2007). Crafting & Executing Strategy, 15th ed. New York, USA: McGraw-Hill Irwin. Tigre, P, B. and Dedrick, J. (2004). E-commerce in Brazil: Local Adaption of a Global technology. Electronic Markets, Vol 14 (1), pp36-47. Turpin, D. (1993). Strategic alliances with Japanese firms: Myths and realities. Long Range Planning, Vol 26 (4), pp. 11-15. Van Heerden, C, H. and Barter, C. (2008). The role of culture in the determination of the standardized or localized marketing strategy. South African Journal of Business, Vol 39 (2). Vaara, E. and Tienari, J. (2008). A Discursive Perspective on Legitimation Strategies in Multinational Corporations. Academy of Management Review, Vol 33 (4), pp185-993. Waywode, M. (2002). Global Management Concepts and Local Adaptations: Working Groups in the French and German Car Manufacturing Industry. Organization Studies, Vol 23 (4), pp497-524. Word count c. 3,472.. (Excluded Bibliography) No Plagiarism has found. Software used (availavle at: www.plagiarismdetect.com/). Suggestion: Before the competitive advantage, a little literature rivew will be attached. In this paper example of action has given that is excellent but there is not enough sentence has written about the future (result), such as Kotler said Advertise remain same but the message might have a little variation but no impact of any company for using this strategy and what problem they faced during they use this strategy and how they overcome has not given. It will be a very good paper if the suggestions are followed. Read More