The Notion of Global Industries
Global industries are defined as those where a firm’s competitive position in one country is affected by its position in other countries, and vice versa.
Information is collected and analyzed by global industries
Consider Ex. 8-1
4 Drivers affect Industry Globalization Potential:
1. Market Globalization Drivers
2. Cost Globalization Drivers
3. Government Globalization Drivers
4. Competitive Globalization Drivers
Market Globalization Drivers
Common Customer Needs - culture, climate, economic development
Global Customers and Channels - are there channels of distribution which cross country boundaries? Gap case
Transferable Marketing - Brand Name? E.g. P and G case, Gerber Baby Foods
Lead Countries - where do innovations start - e.g. Japan, Germany - Toys R Us
Cost Globalization Drivers
Global Economies of Scale and Scope - can you produce in several countries to achieve economies?
Steep Experience Curve - can you concentrate activities?
Global Sourcing Efficiencies - GAP
Favorable Logistics - can you move products efficiently? Central warehousing?
Differences in Country Costs- exchange rates, tariffs, nontariff barriers - what does it cost to do business in Country X?
High product Development Costs
Fast Changing Technology
Government Globalization Drivers
Favorable Trade Policies - reclassification, tariff rate reduction, incentives for foreign investment, local content regs, ownership restrictions
Consider Exporters’ Encylopedia
Compatible Technical Standards - are you at a similar level of development - e.g. types of testing, certifications, etc.
Common Marketing Regulations - e.g. packaging, labeling laws
Competitive Globalization Drivers
High Exports and Imports - do the countries trade regularly?
Competitors from Different Continents and Countries - who are your rivals?
Interdependent Countries - such as those in multinational markets
Global Marketing Strategy
Where does each product fit in the entire plan?
Where does your firm “fit” in the global industry? Are you a leader, competitor, follower, nicher
Porter suggests that we consider potential entrants, suppliers, buyers, and their relationships, plus substitutes than threaten our industry
Also consider the effects of mergers, takeovers, and alliances in gaining market entry
Do other firms rely on your company? Interdependency
Examples: Black and Decker, Proctor and Gamble
Benefits: What economies can be gained?
Can some markets be grouped into regions?
Can some sourcing be done for several markets?
Can manufacturing in one location serve several markets?
Can similar technologies or basic products serve several markets?
Can intellectual property rights be maintained?
Gerber Baby Foods vs. Bissell
Feeding babies vs. cleaning
Benefits of Global Marketing
Cost Reduction - reduces duplication of activities, savings possible in all areas of marketing mix
Improved Products and Program Effectiveness - draws on creative ideas, higher standards, environmental safeguards from several countries - often a local idea is useful globally (P&G example of 3 detergent attributes)
Enhanced Customer Preference - builds recognition worldwide
Increased Competitive Advantage
Based on regional groupings
Must be real reasons for standardization - there are many times that standardization is not possible:
Cultural Habits - rat stew, horse steaks, bugs
Design taste- Danish furniture vs. French vs. Japanese
Language - products with basis in words, e.g. computer
Size/package: refrigerators in many countries limit sizes
Technical System: voltages, plugs
User/applications: who uses it and how
None: soda, watches, pianos
Standardization vs. Adaptation
How much can be kept the same?
From the customer’s point of view?
From the company’s point of view?
Coke vs. Pepsi
Let’s Consider the Product
Costs of redesign? Engineering time?
Sourcing? local content laws? tariffs? expense of transportation?
Local labor? qualifications? tariff reduction? less vulnerability?
Production facilities? quality of plants? technology?
Nontariff barriers? packaging? ingredients? other restrictions?
Shift costs among multiple markets?
Consumer preferences? changes in taste, size, flavor? use? ads?
Let’s Consider Honda’s 1997 Platform as an Example
Flexible platform to reduce redesign
same platform used for vastly different vehicles
One size does not fit all
Consumer preferences? too small in U.S., smaller in Japan, narrow in Europe
Cross-Subsidization of Markets: Gerber
Identification of Weak Markets: Discover which market segments are ignored in a Competitors’s Home Market
“Lead Market” Concept: which markets set critical standards? Can you enter in these markets first, moving to the others in that area?
SWOT - Competitive Analysis