Today, emerging markets represent more than 20 percent of Abbott's total business.” As one of the fastest growing pharmaceutical markets in the world, India. The products sold by MNCs often have a large part of their added value in the downstream activities of the value chain.
Global and Regional Strategies
While many of the ideas that worked well in the North American market served as a basis for operations in the southern hemisphere, the company soon realized that it was operating in a market where local tastes were different and competition was fierce. The in-depth integrative case at the end of Part Two provides more detail on Walmart's successes and challenges in the international market, including those related to administrative coordination. It did well in the US and briefly boosted sales in the Middle East before taking a serious dip.
Surveys showed that the winners among sellers in the Middle East had certainly done better, but the vast majority had done worse. Nevertheless, companies may experience a very temporary phase in this quadrant, but the standards lie in the other three.
Environmental Scanning
Shanghai Cable has more than 3 million customers, and a third of them have broadband cable that allows them to access the Internet and interact with television programs in what industry analysts say is one of the most advanced cable systems in the world. If OpenTV's environmental scan is correct, these arrangements will help generate revenue and profits to support the company's global expansion into India and elsewhere. 40 Another example is Cisco Systems, the world's largest manufacturer of networking equipment, which has grown rapidly through acquisitions.
From 2000 to 2009, it bought more start-ups than any other company in the world. Already the world's largest internet and mobile phone market, China is likely to become even more crucial to the networking equipment maker's growth as the country's growing middle class gains access to the new technology.
Internal Resource Analysis
The company analyzed the environment in China and concluded that the Shanghai market was ideal for its software. In 2010, OpenTV had also launched its middleware solution for Southern Yinshi Network Media Ltd., a subsidiary of Southern Media Corporation, one of China's leading broadcasting groups. Cisco's China strategy is the result of a careful analysis of the broad macro-political-economic environment and competitive landscape.
Toyota and Honda have had a quality edge over the competition in recent years in the eyes of American managers who don't want to spend too much time looking at themselves; otherwise, we might miss changes in the environment that would alter the company's strengths and weaknesses based on that market.
Goal Setting for Strategy Formulation
For strategic planning, profitability and marketing goals therefore take on greater importance and deserve more attention. In 2010, Ford continued to restructure and streamline its operations in Europe, even as its share of the European market fell to 7.8 percent. Once the strategic goals are established, the MNC will develop specific operational goals and controls, usually through a two-way process at the subsidiary or branch level.
For example, MNC headquarters may require periodic financial reports, limit on-site decisions to matters involving less than $100,000, and require that all client contracts be cleared through the home office. These guidelines are designed to ensure that the overseas group's activities support the goals in the strategic plan and that all units operate in a coordinated effort.
Location Considerations for Implementation
In addition to these considerations, MNCs consider the specific benefits offered by host countries, including low tax rates, rent-free land and buildings, low- or no-interest loans, subsidized energy and transportation rates, and an infrastructure of well developed. it provides many of the services found at home (good roads, communication systems, schools, health care, entertainment and housing). Local Issues Once the MNC has chosen the country in which to locate, the firm must choose the specific location. Common considerations include access to markets, proximity to competitors, availability of transportation and electricity, and desirability of the location for workers coming from abroad.
Conversely, banks often choose metropolitan areas because they feel they must have a presence in the business district. Some multinational companies choose locations where the costs of running a small business are significantly lower than running a large business.
Combining Country and Firm-Specific Factors in International Strategy
It should be noted that the "strength" or "weakness" of AMFs and CSAs is a relative notion that depends on the relevant market and the CSAs and AMFs of potential competitors. Given these factors, FSAs tend to be less important compared to CSAs of location and energy costs, which are the main sources of the firm's competitive advantage. In terms of business strategy, firms in quadrants 2 and 3 can benefit from low-cost and differentiation strategies.
For example, a Quadrant 4 firm that has strong FSAs in marketing (adaptation) can operate internationally without relying on its home market CSA, or host country CSAs. By improving potential FSAs in marketing or product innovation and increasing value added through vertical integration, a Quadrant 1 firm can move to Quadrant 3.
The Role of the Functional Areas in Implementation
As mentioned in the first part of the chapter, if a company has production facilities in different countries but does not attempt to integrate its entire operations, the company is known as multi-domestic. Finally, if the product is labor intensive, as in the case of microcomputers, then the trend is for the product to be grown in low-cost places such as Mexico or Brazil, where labor costs are relatively low and the infrastructure (electrical power, communication systems, transportation systems) is sufficient. to support production. In the past, when a company went international, operations abroad typically relied on the local area for funding, but the rise of global financing has ended this practice.
Multinational companies have learned that transferring funds from one part of the world to another or borrowing funds in international money markets is often cheaper than relying on local sources. One of the biggest recent headaches for MNCs in implementing strategies in the financial dimension has been currency revaluation.
Strategies for Emerging Markets
A group of researchers and companies have begun to explore the potentially untapped markets at the base of the pyramid (BOP). Finally, business models successfully forged at the base of the pyramid have the potential to profitably travel to higher-income markets because adding costs and features to a low-cost model can be easier. 58 This last finding has significant implications for the globalization-national responsiveness framework introduced at the beginning of the chapter and for the potential for MNCs to achieve a truly transnational strategy.
Nestlé is at the forefront of the latter goal by sponsoring "farmer field schools" in Côte d'Ivoire, 61 which support both the production of high-quality cocoa (providing Nestlé access to that labor and production) and the social benefits of that production. Most importantly, the company must inform the general public about the product.
Can Internet and Mobile Access Transform Poor Economies at the Base of the Pyramid?
In 2002, the market predicted that approximately 30 percent of the population would use cell phones by 2008. Smart offered pay phones that could be recharged using a microchip that was already in cell phones, making it possible for to be recharged "in the air". The company then started offering pricing plans that consisted of extremely small increments, so even the low-income consumer could take advantage of this opportunity. It worked in Smart's favor as more and more people started using the service every day, and the mobile industry achieved a 30 percent margin in 2004, changing forecasts to a staggering 70 percent mobile phone usage rate by in 2008.
Smart's parent company saw a more than tenfold increase in profits in 2004 compared to 2003, largely due to its focus on the highly lucrative market at the base of the pyramid. The collaboration between Danone and Grameen also faced setbacks: milk prices soared, the opening of factories was postponed and saleswomen could not make a living by selling yogurt alone.
Entrepreneurial Strategy and New Ventures
The opening feature of International Management World Chapter 11 provides a discussion of the globalization of online retailing. Recall the World of International Management discussion of the pharmaceutical industry that opened this chapter. Would this emphasis be the same as in the United States, or would IBM give primary attention to one of the other imperatives.
How can a company identify opportunities at the "bottom of the pyramid" (ie, low-income markets). In your answer, include a discussion of the marketing, production, and financial implications.
Questions
Moreover, the low cost of labor in a country where almost 15 percent of people are still unemployed is a big incentive. As the Canadian firm considers relocating the production of small power tools to Poland, it may be favorably impressed by the large and successful R&D projects that are in progress in the country, including institutions such as Siemens, Avio, IBM, Intel, Motorola, GlaxoSmithKline. , and more. There will likely be little competition for the Canadian firm for the next couple of years, because small power tools don't have much value and no other manufacturers are trying to tap into what the Canadian firm sees as "a market in development for the 21st Century." However, a final decision on the matter will have to wait until the company has made a full assessment of the market and the competitive nature of the industry.
In the
International Spotlight
The partners believe that over the next two months they will have a very good idea of what will happen regarding the opening of Asian markets. Amanda Brendhart, Jose Gutierrez and Rhoda Schreiber founded and are partners in a small electronics firm, Electronic Visions, which developed and patented some state-of-the-art computer components. The main problem is that the PC market has started to soften in recent months, and many of the manufacturers are offering significant discounts to generate sales.
If trade barriers are removed, the partners are convinced that they can export the goods at very competitive prices. In addition, the partners aim to find a partner in each market so that they have someone to help with the marketing and financing of the product.
You Be the International
