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1. Technological environment – How sophisticated is the telecommunications, IT and infrastructure? Example: Microfinance bank, Bank Rakyat Indonesia had IT budget in 1995 of US1bn+ to buy a satellite to provide communications to its hundreds of rural branches, instead of bankers on bicycles through villages. By 2005 could do communications plan for less than US100K through internet and cell phones. Rural poor shared cell phones and computer terminals.

2. Adaptation – Even McDonalds adapts to local tastes (McArabia, McDo in France) Islamic countries, vegetable shortening as opposed to animal fats; India, use mutton instead of beef; Japan, no formaldehyde in hair and skin products. Coca Cola tastes different everywhere. Also, must have parts, servicing, repairs. Otherwise, your export venture risks being a one-off. The three types of innovation are breakthrough (polio vaccine, computer, airplane), technological (cell pones, GPS, hybrid engines), and ordinary (long lasting flavor of gum, teeth whiteners, better laundry detergent).

3. Idea Stage: Identify need for promising new products. Concept Stage: Refined idea tested to determine acceptance by potential customers and members of distribution channel. Product Development Stage: Use focus groups to identify product attributes, consumer preference through multiple brand comparisons, risk analysis, level of repeat purchases, or intensity of preference analysis. Test Marketing Stage: Market test helps project actual sales and acceptance of the new product. Commercialization: Defining the marketing mix (product, price, distribution, and promotion) and executing.

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Product – convergence of tastes across borders may be happening, but the products are difficult to standardize because government standards are heterogeneous.

Pricing - Avoid temptation of flat-rate pricing across all foreign markets. Instead, adapt by setting a price for a foreign market based on cost of doing business there, competitor’s prices, consumer’s price sensitivity, market structure, and the overall conditions in that country. Avoid pricing yourself out of a market, yet they should not price so low that they are not able recoup the investment made. Also consider arbitrage opportunities, F/X, globalization makes it easy for consumers to check.

Promotion – Consider market segmentation, consumers divided into groups based on similar purchasing behavior. Segments can be geographic, demographic, sociocultural, and psychological. Segmentation is relevant to all elements of the marketing mix, and segmentation is different in each country, other than perhaps the global youth segment.

Place – entry mode can determine distribution channel. Consider retail concentration – is it one retailer supplying most of the market, or is it fragmented with many retailers. More fragmentation means longer channel length with large sales force to sell to all the retailers – perishable goods may not survive in longer channels. Exclusivity and quality of channels may impede market entry.

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1. Standardization-adaptation – int’l marketing strategies differentiated according to the degree of standardization (vs adaptation) pursued with respect to the marketing mix (product, price, distribution, and promotion). Standardization uses the same marketing mix elements across different markets, whereas adaptation tailors marketing mix elements to each market.

2. Concentration-dispersion – geographic design of int’l marketing organization. MNE seeks optimal geographic spread of its value-chain activities, where synergies and comparative advantages can be maximized. Marketing strategies consolidated (‘concentrated’) at one location or scattered (‘dispersed’) across various markets.

3. Integration-independence – how to orchestrate competitive marketing activities across countries. Warfare metaphor. Key is whether subs are standalone profit centers (independence), or part of a grander strategic design (integrated units). There is greater communication and consultation in the integrated option. Marketing strategy will thus vary greatly e.g. integrated view might sacrifice profits in one place for success in another.

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GLOBAL MARKETERS – standardize product design, advertising theme, pricing, even brand name and promotions, but not channel. Concentration of value chain design, logistics, hierarchical control and integration. Example: Godiva Europe – Belgians make great chocolate, brand name is internationally recognized, and now goal is to create common advertising throughout the world. Even standardized channels by owning its own outlets.

INFRASTRUCTURAL MINIMALISTS – branding and channel are more standardized, but advert theme, product pricing, promotion more localized. There is a global infrastructure, but minimal intervention locally. Example: Gallo Rice – same brand name and logo across all markets, but product sold from country to country varies, advertising also varies, channel strategy was more uniform (mostly to institutions instead of retailers), production in four locations but with centralized product design and development

TACTICAL COORDINATORS – somewhat standardized for sales promotion, more localized product design, advertising theme, pricing, channel design. Dispersed logistics. Ex. AXA: insurance sales highly regulated, local accounting and reporting required, and locally licensed sales force. But common MIS system & Strategy Committee coordination allowed some coordination of sales across countries

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Developing and marketing new products is very profitable – must do in intensely competitive markets.

Disperse R&D globally to take advantage of areas of cutting edge research. Explains success of Silicon Valley, Silicon Fen (Cambridge UK), Route 128 (Boston), Waterloo (Canada), Haifa (Israel), Bangalore (India), Shanghai (China), Kobe (Japan), Singapore. Must integrate globally R&D, marketing, and production. Different locations can work on different technologies which can help produce new products.

L’Oreal example. Standardized, global marketer, right? Same approach for Paris and New York, apply in India but ran into third world perceptions of their products as ‘alien extravagances’ instead of being embraced by an emerging markets boom. Then to their great credit, they set up local salons and hairdresser colleges to localize. Something like local R&D? Depends on the flowback of information and how much shared learning they did.

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Part of corporate strategy is adopting appropriate structures. This is not always easy to do. (1) Entrepreneurs struggle to scale up from their initial success. The skills and structures required to launch a business – obsessive focus, control, vision, multiple roles – are quite different to what is required to grow the business further – delegation, peripheral vision, collaboration. (Hamm, 2002) (2) Strategy could also be used to try and define the environment. If the firm is content to defend its position, it should be because it has something to lose – the market is attractive and they have a distinctive position based on unique resources and capabilities (structuralist). In less attractive conditions where firm cannot match resources and capabilities of entrenched competitors, firm can be innovative and pursue new opportunities (reconstructionist). Dubai example. (Kim Mauborgne, 2009) (3) Managers cope with changes in firm’s external environment through choice of an appropriate strategy and design of a matching structure (Jennings and Seaman, 1994)

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Global area structure – no hierarchical preference given to a particular region, or to headquarters

Global customer structure – could sell the same product to different businesses (autos, media, mining). The customers have totally different buying patterns, so they are each their own ‘vertical’

Global product structure – for consumer product firms, world market share determines competitive position, thus each product operates globally

Global matrix structure – complex structure involving global business units, coordinating between business managers, product managers and area managers. This means managers often report to several people, creating conflicts and the need for committees to facilitate communication and resolve even minor issues

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HSBC operates in 81 countries, so area structure makes sense. But how to coordinate the 4 main businesses? Do they offer all of these businesses in all 81 countries?

Commercial Banking Our global reach and expertise helps millions of customers – from small businesses to large multinationals – unlock their potential. Global Banking and Markets HSBC Global Banking and Markets provides financial services and products to corporates, governments and institutions. Private Banking HSBC Private Bank offers private banking and wealth management services to wealthy individuals and their families. Retail Banking and Wealth Management We offer advice and personal wealth products that range from personal banking and pensions to tax-efficient investing and life insurance. (Source: HSBC website)

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Bayer AG defines common values, goals and strategies for the entire Group. The three subgroups and three service companies operate independently, led by the management holding company. The Corporate Center supports the Group Management Board in its task of strategic leadership.

Business operations are the responsibility of the subgroups:

Bayer HealthCare is among the world’s foremost innovators in the field of pharmaceutical and medical products.

Bayer CropScience, with its highly effective products, pioneering innovations and keen customer focus, holds global leadership positions in crop protection and non-agricultural pest control.

Bayer MaterialScience is a renowned supplier of high-performance materials such as polycarbonates and polyurethanes, and innovative system solutions for a wide range of everyday uses (Source: Bayer website)

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P&G’s structure has removed many of the traditional overlaps and inefficiencies that exist in many large companies. Global Business Units (GBUs) focus solely on consumers, brands and competitors around the world. They are responsible for the innovation pipeline, profitability and shareholder returns from their businesses. Market Development Organizations (MDOs) are charged with knowing consumers and retailers in each market where P&G competes and integrating the innovations flowing from the GBUs into business plans that work in each country. Global Business Services (GBS) utilizes P&G talent and expert partners to provide best-in-class business support services at the lowest possible costs to leverage P&G’s scale for a winning advantage. Lean Corporate Functions ensure ongoing functional innovation and capability improvement. (Source: P&G website)

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Olympus uses a matrix organizational structure that maximizes the use of corporate resources by interconnecting businesses and functions in a balanced and efficient manner.

(Source: Olympus website)

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-Global supply chains rise above national supply chains which survive due to protectionism, xenophobia, and undeveloped infrastructure -MNCs now outsource as much as 75% of production costs, enabled by efficient manufacturing that can be done in short-runs as efficiently as mass production, increasing flexibility for outsourcing and having a global value chain. Global value chain fully integrated between customers, distributors, manufacturers and suppliers in a single global information sharing system. Diffusion of practices such as just-in-time inventory and total-quality-management allows for efficiency of value chain. -Manufacturer-distribution linkages have become consolidated into multimarket networks, improving efficiency between wholesalers, distributors, retailers, and transporters – increasing retailer concentration (Wal-mart), less need for national distributors, one-stop-shopping by consumers, retailing has become global (IKEA, Carrefour, Wal-mart etc.), and logistics carriers have become more efficient. -Outsourcing – a vertical integration strategy that can help to focus on your own core competencies when other firms can do parts of your value chain more efficiently with resources you may not have. Frees up capital, reduces operating expenses and reduce risks. Disadvantage is that you may lose ability to develop your own competencies for the sake of shorter term profitability, and you lose control over parts of your value chain. (Hill, 2009)

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Recruit best and brightest irrespective of background, train them to do the rest (consulting, investment banking). Conversely, keep culture uniform at senior levels (country heads of HSBC and ABN AMRO)

Rewards – must continue on the same trajectory irrespective of location. Based in Hong Kong, must earn what you would in London or New York, even the business earns less money in Hong Kong.

For larger companies, HR itself must have first hand understanding of how international postings work

Labor-management relations – standardize labor contracts. 32,000 VW employees in Mercosur, doesn’t make sense to try and negotiate all of these independently, try and standardize to the extent you can with union leaders.

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Recall the cycle a global firm goes through – initially everything is centralized, but as the firm grows, must decentralize authority. When too many conflicts arise, have to recentralize control, often through organizational restructuring that may involve replacing certain managers.

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US: personal achievement, individual success (money, promotion) China: group affiliation, harmony Japan: respect, power LatAm: family life, personal life [Such generalizations probably oversimplify]

Intellectual capital for global mindset: knowledge of global business, industry, socio-politics, cultures, histories, languages, ability to manage global teams

Psychological capital: self-confidence, resiliency, curiosity, fearlessness and risk taking, adventure, openness and ability to suspend judgment, passion for cultural diversity, adaptability and ability to connect to people from other parts of the world.

Social capital: ability to work, build trusting long-term, relationships, and generate positive energy with people from other parts of the world

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Specific skills are usually required for a manager to be sent on a foreign assignment. Whether it is a technical skill or the ability to set up a new office, there needs to be a gap that the manager fills to justify the costs of overseas posting. Additionally they should want such an assignment and be open to different cultures and be curious about them. This social aspect will aid the manager in the inevitable difficulties brought by distance and culture that come about from living in another country. Having a strong global mindset will allow them to work with their local customers and suppliers and aid in all of their local business interactions, while at the same time allowing them to transfer local knowledge back to headquarters so they can best manage the operation. In some situations, language skills will be critical in determining which managers will be good for which foreign assignments. Although a lot of business is now done in English, in many markets only the local dialogue will suffice and it is necessary that the manager can communicate with both their customers and employees.

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Have the manager work with the employees in the foreign office prior to moving to that country. Allows knowledge building of local market while also building mutual trust and awareness of each other, opening lines of communication. Mentoring structure also helps by letting manager share with others who made similar moves so they can prepare themselves for what lies ahead. If the manager is moving with his or her family, it is important to prepare them as well. Having the support of the family is crucial to the success of an expatriate manager so it is critical that they are prepared for their experience. Must also prepare the expatriate for return home - need to be worked back into the home office, with the chance to utilize the new skills and knowledge that they learned while overseas. Best to start them on a project with the home office before they leave their foreign post to transition. If this step is not handled well, the manager might not feel needed at the home office and will start to look for new opportunities.

Expatriate compensation package can include: relocation assistance, housing assistance and allowance, car allowance, travel expenses to return to host country for employee and their family, living expenses, possibly school assistance for children, and tax equalization.

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Expatriates often have greater knowledge of the product or very specific skills relating to it that locals may not. When a business is first locating abroad it might be beneficial to use expatriate workers who already have the needed skills to get that business up and running quickly. They probably have experience in similar circumstances in other foreign countries so they are adept at what is required to start a foreign operation.

A host-country manager might be better in an established operation where they have learned the products and process of the company. They are also generally good mid- and low-level managers as they are growing in the company.

Strong economic incentive to use local managers - host-country managers are often less expensive than expatriates so there is a clear cost advantage to use them.

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Getting the right person into the job goes hand-in-hand with their leadership styles.

What kind of leadership style would be best for the local head of a North American MNE in Mexico? How about for a Latin American MNE in North America (think Vale-Inco or Cemex).

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Third country national – not a local, and not from the country of your employers.

Inpatriate – A host country or third country national working in the home country because of their ability to develop the global core competency of the venture.

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