Strategic Management

Strategies for International Expansion
a different approach for Trans National Firms and SME
ESC Brest
ESC Bretagne Brest - Globalization and Corporate Strategies
Objectives of the session
Understand the impact of globalization on corporate strategies: the necessity to grow international Review the corporate strategies for growth and the challenges raised by international expansion Understand how small and medium size enterprises can expand on foreign markets Understand the differences in the international growth pattern between small and medium size firms and large trans-national ones Understand how large trans-national enterprises deploy their strategies across the entire world
The characterisitics of global companies

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Summary of the previous episode
The major consequences of the globalization are related to the opening of the world. They are: Massive increase of world trade, exchanges of any kind (raw materials, industrial goods, services, technologies, ideas, cultures) Massive increase of cross border investments, foreign direct investments the seed of the development of newly emerging countries, when they open their economies to the routes of the open world Massive increase of migration flows, within countries, from rural areas to cities and megalopolis within countries, but also from country to country Massive increase of the competition at every level (regional, country, cities, companies and organizations, people): hrarsh regime of selection of the best, fight for survival in a global world
Reasons for corporate management
Three majors phenomenon are heavily contributing to drastic and rapid changes in the environment of most companies

The globalization of the economies The acceleration and increased cost of technological change
The Internet
As the environment is changing quickly, companies are put under pressure to ensure that their strategies are adapted to the new environment and allow them to take chance from rather suffering from the two new factors These three factors contribute in making strategic management more necessary than ever
Impact of globalization on Strategic Management
Not too long ago, a business corporation could be successful by focusing only on making and selling goods and services within its national boundaries. International considerations were minimal. Profits earned from exporting products to foreign lands were considered frosting on the cake but not really essential to corporate success. Today, everything has changed. Globalization, the internationalization of markets and corporations, has changed the way modern corporations do business. To reach the economies of scale necessary to achieve the low costs, and thus the low prices, needed to be competitive, companies are now thinking of a global (worldwide) market instead of a national market.
Ex. Nike and Reebok manufacture their athletic shoes in various countries throughout Asia for sale on every continent.
Corporate and business strategies

Any company is put under the pressure of a global competition If it is a nomad firm (active in an industry open to global competition), the company must confront every day with the best-inclass competitors. It must be competitive. If it a protected form, (active in an industry apparently only national or local), the company must understand that most likely, sooner or later, this industry will change nature and be opened to the world competition. It must work actively on its competitiveness otherwise it could be rapidly eliminated from its market by the entry of a new competitor enjoyed must higher competitiveness thanks to better mix of the cost of factors or specific competitive advantage. The only way to strengthen its muscle for a firm is to go where the battle is, to confront with the competition by entering new markets and compete against the leaders in their respective international markets
Strategic Management Directional Strategy

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Strategies
Business firms use all 3 types of strategy simultaneously. A hierarchy of strategy is the grouping of strategy types by level in the organization.
This hierarchy of strategy is a nesting of one strategy within another so that they complement and support one another. Functional strategies support business strategies, which in turn, support the corporate strategy.
Corporate, Business, Functional strategies
Corporate strategy Business strategy (policy) Functional strategies

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Strategies
Corporate strategy
Corporate strategy describes a companys overall direction in terms of its general attitude toward growth and the management of its various businesses and product lines. Corporate strategies typically fit within the 3 main categories of stability, growth and retrenchment Business strategy usually occurs at the business unit or product level, and it emphasizes improvement of the competitive position of a corporations products or services in the specific industry or market segment served by that business unit. Business strategies may fit within 2 overall categories of competitive or cooperative strategies. Functional strategy is the approach taken by a functional area to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage.
Business strategy
Functional strategy
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Strategy Formulation
Corporate Strategy
Competitive Strategy Competitive Tactics
Cooperative Strategy
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Porters Competitive Strategies
Competitive Strategy raises the following questions: Should we compete on the basis of low cost (and thus price), or should we differentiate our products or services on some basis other than cost, such as quality or service? Should we compete head to head with our major competitors for the biggest but most sought-after share of the market, or should we focus on a niche in which we can satisfy a less sought-after but also profitable segment of the market? Michael Porter proposes 2 generic competitive strategies for outperforming other corporations in a particular industry: lower cost and differentiation. These strategies are called generic because they can be pursued by any type or size of business firms, even by not-for-profit organizations.
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Lower cost strategy is the ability of a company or a business unit to design, produce, and market a comparable product pore efficiently than its competitors. Differentiation strategy is the ability to provide unique and superior value to the buyer in terms of product quality, special features, or after-sale service. Porter further proposes that a firms competitive advantage in an industry is determined by its competitive scope, that is, the breadth of the companys or business units target market.
Before using 1 of the 2 generic competitive strategies (lower cost or differentiation), the firm or unit must choose the range of product varieties it will produce, the distribution channels it will employ, the types of buyers it will serve, the geographic areas in which it will sell, and the array of related industries in which it will also compete. This should reflect an understanding of the firms unique resources.
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Simply put, a company or business unit can choose a broad target (that is, aim at the middle of the mass market) or a narrow target (that is, aim at a market niche). Combining these 2 types of target markets with the 2 competitive strategies results in the 4 variations of generic strategies depicted in Figure 5-4. When the lower cost and differentiation strategies have a broad mass market target, they are simply called cost leadership and differentiation. When they are focused on a market niche (narrow target), however they are called cost focus and differentiation focus. Although research does indicate that established firms pursuing broad-scope strategies outperform firms following narrow-scope strategies in terms of ROA, new entrepreneurial firms have a better chance of surviving if they follow a narrow-scope over a broad-scope strategy.
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Cost leadership is a low-cost competitive strategy that aims at the broad mass market and requires aggressive construction of efficient-scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization in areas like R&D, service, sales force, advertising, and so on. Because of its lower cost, the cost leader is able to charge a lower price for its products than its competitors and still make a satisfactory profit.
Ex. Wal-Mart, Southwest Airlines, Ryanair, Timex
It may also decide to sell at a high price level, although its cost structure is relatively low
Ex. Apple in Tablet business
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Cost leadership
Having a low-cost position also gives a company or business unit a defense against rivals. Its lower costs allow it to continue to earn profits during times of heavy competition.
Its high market share means that it will have high bargaining power relative to its suppliers (because it buys in large quantities). Its low price will also serve as a barrier to entry because few new entrants will be able to match the leaders cost advantage. As a result, cost leaders are likely to earn above-average returns on investments.
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Differentiation is aimed at the broad mass market and involves the creation of a product or service that is perceived throughout the industry as unique. The company or business unit may then charge a premium for its products.
This specialty can be associated with design or brand image, technology, features, dealer network, or customer service.
Differentiation is a viable strategy for earning above-average returns in a specific business because the resulting brand loyalty lowers customers sensitivity to price. Increased costs can usually be passed on to the buyers.
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Differentiation
Buyer loyalty also serve as a barrier new firms must develop their own distinctive competence to differentiate their products in some way in order to compete successfully.
Ex. Mercedes-Benz, Nike, Apple
Research does suggest that a differentiation strategy is more likely to generate higher profits than is a low-cost strategy because differentiation creates a better entry barrier.
A low-cost strategy is more likely to generate increases in market share.
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Cost focus is a low-cost competitive strategy that focuses on a particular buyer group or geographic market and attempts to serve only this niche, to the exclusion of others.
In using cost focus, the company or business unit seeks a cost advantage in its target segment.
The cost focus strategy is valued by those who believe that a company or business unit that focuses its efforts is better able to serve its narrow strategic target more efficiently than can its competition. It does, however, require a tradeoff between profitability and overall market share.
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Differentiation focus, like cost focus, concentrates on a particular buyer group, product line segment, or geographic market.
In using differentiation focus, the company or business unit seeks differentiation in a targeted market segment. This strategy is valued by those who believe that a company or a unit that focuses its efforts is better able to serve the special needs of a narrow strategic target more effectively than can its competition.
Ex. Caseys General Stores creating stores in small countryside cities
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imitate
IV Strategy Formulation 22
Selection process for a competitive strategy
Cost advantage
Differentiation advantage
Broad Market approach

(global market)
Narrow Market approach

(niche market)
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Strategy Formulation
Business Strategy
Directional strategy Portfolio strategy Parenting strategy
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Corporate, Business, Functional strategies
Corporate strategy Business strategy (policy) Functional strategies

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Directional Strategy
Just as every product or business unit must follow a business strategy to improve its competitive position, every corporation must decide its orientation toward growth by asking the following 4 questions:
1.
Should we expand, cut back, or continue our operations unchanged? Should we concentrate our activities within our current industry or should we diversify into other industries?
2.
3. 4.
If we want to grow and expand nationally and/or globally

Should we do so through internal development or through external acquisitions, mergers, or strategic alliances?
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A corporation's directional strategy is composed of 3 general orientations (sometimes called grand strategies): 1. Growth strategies expand the company's activities. 2. Stability strategies make no change to the company's current activities. 3. Retrenchment strategies reduce the company's level of activities. Having chosen the general orientation (such as growth), a company's managers can select from several more specific corporate strategies such as concentration within 1 product line/industry or diversification into other products/industries. (See Figure 6-1.) These strategies are useful both to corporations operating in only 1 industry with 1 product line and to those operating in many industries with many product lines.
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Selection process for the business strategy
Step 1 Growth Strategy
Stability Strategy
Retrenchment Strategy
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Directional Strategy Growth Strategies
Concentration Vertical growth Horizontal growth Diversification Strategies Concentric (related) diversification Conglomerate (unrelated) diversification
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Growth Strategies
By far the most widely pursued corporate directional strategies are those designed to achieve growth in sales, assets, profits, or some combination.
Companies that do business in expanding industries must grow to survive. Continuing growth means increasing sales and a chance to take advantage of the experience curve to reduce the per-unit cost of products sold, thereby increasing profits. This cost reduction becomes extremely important if a corporation's industry is growing quickly and competitors are engaging in price wars in attempts to increase their shares of the market. Firms that have not reached "critical mass" (that is, gained the necessary economy of large-scale production) will face large losses unless they can find and fill a small, but profitable, niche where higher prices can be offset by special product or service features.
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A corporation can grow internally by expanding its operations both globally and domestically, or it can grow externally through mergers, acquisitions, and strategic alliances. A merger is a transaction involving 2 or more corporations in which stock is exchanged, but from which only 1 corporation survives. Mergers usually occur between firms of somewhat similar size and are usually "friendly." The resulting firm is likely to have a name derived from its composite firms. An acquisition is the purchase of a company that is completely absorbed as an operating subsidiary or division of the acquiring corporation.
Acquisitions usually occur between firms of different sizes and can be either friendly or hostile. Hostile acquisitions are often called takeovers. A strategic alliance is a partnership of 2 or more corporations or business units to achieve strategically significant objectives that are mutually beneficial.
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The 2 basic growth strategies are concentration on the current product line(s) in one industry and diversification into other product lines in other industries. Concentration
If a company's current product lines have real growth potential, concentration of resources on those product lines makes sense as a strategy for growth. The 2 basic concentration strategies are vertical growth and horizontal growth. Growing firms in a growing industry tend to choose these strategies before they try diversification.
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Vertical Growth Vertical growth can be achieved by taking over a function previously provided by a supplier or by a distributor. The company, in effect, grows by making its own supplies and/or by distributing its own products. This may be done in order to reduce costs, gain control over a scarce resource, guarantee quality of a key input, or obtain access to potential customers. This growth can be achieved either internally by expanding current operations or externally through acquisitions.
Henry Ford, for example, used internal company resources to build his River Rouge Plant outside Detroit. The manufacturing process was integrated to the point that iron ore entered 1 end of the long plant and finished automobiles rolled out the other end into a huge parking lot.
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Vertical Growth Vertical growth results in vertical integrationthe degree to which a firm operates vertically in multiple locations on an industry's value chain from extracting raw materials to manufacturing to retailing. More specifically, assuming a function previously provided by a supplier is called backward integration (going backward on an industry's value chain).
Ex. Rubber plantations for Michelin
Assuming a function previously provided by a distributor is labeled forward integration (going forward on an industry's value chain).
Ex. First Stop network for Bridgestone
The firm, in effect, builds on its distinctive competence by expanding along the industry's value chain to gain greater competitive advantage.
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Horizontal growth
Horizontal growth can be achieved by expanding the firm's products into other geographic locations and/or by increasing the range of products and services offered to current markets.
In this case. the company expands sideways at the same location on the industry's value chain. A company can grow horizontally through internal development or externally through acquisitions or strategic alliances with another firm in the same industry.
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Horizontal growth Horizontal growth results in horizontal integrationthe degree to which a firm operates in multiple geographic locations at the same point in an industry's value chain. Horizontal integration for a firm may range from full to partial ownership to long-term contracts.
Ex. KLM, the Dutch airline, purchased a controlling stake (partial ownership) in Northwest Airlines to obtain access to American and Asian markets. KLM was unable to acquire all of Northwest's stock because of U.S. government regulations forbidding foreign ownership of a domestic airline (for defense reasons). Ex. At a later stage Air France acquired KLM and created the n1 airline in Europe operating from two hubs, Paris and Amsterdam
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Diversification Strategies
When an industry consolidates and becomes mature, most of the surviving firms have reached the limits of growth using vertical and horizontal growth strategies.
Unless the competitors are able to expand internationally into less mature markets, they may have no choice but to diversify into different industries if they want to continue growing. The 2 basic diversification strategies are concentric and conglomerate.

Concentric (Related) Diversification Conglomerate (unrelated) Diversification
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Diversification Strategies The 2 basic diversification strategies are concentric and conglomerate.
Concentric (Related) Diversification
Growth through concentric diversification into a related industry may be a very appropriate corporate strategy when a firm has a strong competitive position but industry attractiveness is low. By focusing on the characteristics that have given the company its distinctive competence, the company uses those very strengths as its means of diversification. The firm attempts to secure strategic fit in a new industry where the firm's product knowledge, its manufacturing capabilities, and the marketing skills it used so effectively in the original industry can be put to good use.
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The corporations products or processes are related in some way:

They possess some common thread. The search is for synergy, the concept that 2 businesses will generate more profits together than they could separately. The point of commonality may be similar technology, customer usage, distribution managerial skills, or product similarity.
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The firm may choose to diversify concentrically through either internal or external means.
American Airlines, for example, has diversified both internally and externally out of the unpredictable airline business into a series of related businesses run by the parent company, AMR Corporation. Building on the expertise of its SABRE Travel Information Network it built a computerized reservations system for the French high-speed rail network and for the tunnel under the English Channel.
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Conglomerate (unrelated) diversification When management realizes that the current industry is unattractive and that the firm lacks outstanding abilities or skills that it could easily transfer to related products or services in other industries, the most likely strategy is conglomerate diversificationdiversifying into an industry unrelated to its current one Rather than maintaining a common thread throughout their organization, strategic manager who adopt this strategy are primarily concerned with financial considerations of cash flow or risk reduction.
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Conglomerate (unrelated) diversification When management realizes that the current industry is unattractive and that the firm lacks outstanding abilities or skills that it could easily transfer to related products or services in other industries, the most likely strategy is conglomerate diversificationdiversifying into an industry unrelated to its current one
A cash-rich company with few opportunities for growth in its industry might, for example, move into another industry where opportunities are great but cash is hard to find. Another instance of conglomerate diversification might be when a company with a seasonal and, therefore, uneven cash flow purchases a firm in an unrelated industry with complementing seasonal sales that will level out the cash flow.
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Step 1 Step 2
Vertical
Concentration
Horizontal
Growth Strategy
Concentric
Diversification
Conglomerate
Stability Strategy
Retrenchment Strategy
Internal / External Growth

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International Growth Strategies
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Step 1 Step 2
Vertical
Step 3
Domestic
International Domestic
International
Concentration
Horizontal
Growth Strategy
Concentric
Diversification
Conglomerate
Stability Strategy
Retrenchment Strategy Internal / External Growth

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International entry options Exporting Licensing Franchising Joint Ventures Acquisitions Green-field development Production sharing Turnkey operations BOT (Built, Operate, Transfer) concept Management contracts
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International entry options In today's world, growth usually has international implications.
Research indicates that going international is positively associated with firm profitability.
A corporation can select from several strategic options the most appropriate method for it to use in entering a foreign market or establishing manufacturing facilities in another country. The options vary from simple exporting to acquisitions to management contracts.
Source : Strategic Management David Hunger / Thomas Wheelen
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International entry options Some of the more popular options for international entry are as follows: Exporting: A good way to minimize risk and experiment with a specific product is exporting, shipping goods produced in the company's home country to other countries for marketing The company could choose to handle all critical functions itself, or it could contract these functions to an export management company. Exporting is becoming increasingly popular for small businesses because of the Internet, fax machines. 800 numbers. and overnight air express services, which reduce the once formidable costs of going international.
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International entry options Licensing: Under a licensing agreement, the licensing firm grants rights to another firm in the host country to produce and/or sell a product. The licensee pays compensation to the licensing firm in return for technical expertise. This is an especially useful strategy if the trademark or brand name is well known, but the company does not have sufficient funds to finance its entering the country directly.
Anheuser-Busch uses this strategy to produce and market Budweiser beer in the United Kingdom, Japan, Israel, Australia. Korea, and the Philippines.
This strategy also becomes important if the country makes entry via investment either difficult or impossible.
The danger always exists, however, that the licensee might develop its competence to the point that it becomes a competitor to the licensing firm. Therefore, a company should never license its distinctive competence, even for some short-run advantage.
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International entry options
Franchising: Under a franchising agreement, the franchiser grants rights to another company to open a retail store using the franchiser's name and operating system. In exchange, the franchisee pays the franchiser a percentage of its sales as a royalty. Franchising provides an opportunity for firms to establish a presence in countries where the population or per capita spending is not sufficient to support a major expansion effort.
Franchising accounts for 40% of total U.S. retail sales. Approximately 44% of U.S. franchisers, such as Toys "R" Us. are currently franchising internationally while an additional 31% are planning to do so.
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International entry options
Joint Ventures: The rate of joint venture formation between U.S. companies and international partners has been growing 27% annually since 1985. It is the most popular strategy used to enter a new country. Companies often form joint ventures to combine the resources and expertise needed to develop new products or technologies. It also enables a firm to enter a country that restricts foreign ownership. The corporation can enter another country with fewer assets at stake and thus lower risk. A joint venture may be an association between a company and a firm in the host country or a government agency in that country. A quick method of obtaining local management, it also reduces the risks of expropriation and harassment by host country officials.
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International entry options Acquisitions:
A relatively quick way to move into an international area is through acquisitionspurchasing another company already operating in that area. Synergistic benefits can result if the company acquires a firm with strong complementary product lines and a good distribution network.
To expand into North America, the Swedish appliance maker, A.B. Electrolux, purchased the major home appliance operations of White Consolidated Industries and renamed the unit Frigidaire.
Research does suggest that wholly owned subsidiaries are more successful in international undertakings than are strategic alliances, such as joint ventures. This is one reason why firms more experienced in international markets take a higher ownership position when making a foreign investment.
In some countries, however, acquisitions can be difficult to arrange because of a lack of available information about potential candidates.
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Stability Strategy Pause/proceed with caution strategy No change strategy Profit strategy
Retrenchment Strategies Turnaround strategy Captive company strategy Sell-out/Divestment strategy Bankruptcy/Liquidation strategy
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Step 1 Step 2
Vertical
Step 3
Domestic
Concentration
Horizontal
International
Growth Strategy
Concentric
Diversification
Conglomerate
Domestic International
Pause
Stability Strategy
No change Profit Turnaround
Retrenchment Strategy Internal / External Growth

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Sell-out
Bankruptcy
The Value Chain and Corporate Strategies
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Value Chain Analysis
An industry Value Chain is a linked set of value-creating activities beginning with basic raw materials coming from suppliers, moving on to a series of value-added activities involved in producing and marketing a product or service, and ending with distributors getting the final goods into the hands of the ultimate consumer. The focus of value chain analysis is to examine the corporation in the context of the overall chain of value-creating activities, of which the firm may be only a part. Very few corporations include a products entire value chain
Ex. Ford Motor Company in its initial stage was a totally vertically integrated firm
Another view at Value Chain consists in analyzing the firms own value chain, set of its own activities creating value to the end customer
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Industry Value Chain Analysis

The Value Chain of most industries can be split into 2 segments, upstream and downstream. An industry can be analyzed in terms of the profit margin available at any point along the value chain. Ex. Auto industry generating most of revenue from financing, insurance, after-service and repair, rather than car production itself.
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Industry Value Chain Analysis
In analyzing the complete value chain of a product, note that even if a firm operates up and down the entire industry chain, it usually has a primary field of expertise where its primary activities lie. A companys center of gravity is the part of the chain that is most important to the company and the point where its greatest expertise and capabilities lie its core competencies. According to Galbraith, a companys center of gravity is usually the point at which the company started. After a firm successfully establishes itself at this point by obtaining a competitive advantage, one of its first strategic moves is to move forward or backward along the value chain in order to reduce costs, guarantee access to key raw materials, or to guarantee distribution. This process is called vertical integration. Ex. Bridgestone and Michelin in rubber plantations
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Channel mix Production Enterprise Product mix The Offer Communication mix Marketing mix Pricing mix The Demand Customer mix
Purchase Human Resource
Supply chain
Finance Suppliers
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Administration
Financing system
Partners
Community
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Marketing Strategy
Marketing strategy deals with pricing, selling, and distributing a product. Using a market development strategy, a company or business unit can (1) capture a larger share of an existing market for current products through market saturation and market penetration or (2) develop new markets for current products. Using the product development strategy, a company or unit can (1) develop new products for existing markets or (2) develop new products for new markets.
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The offer of a company exist only as correspnding to a demand, expressed or latent, from a set of consumers/users
Knowledge of consumer characteristics plays an extremely important role in many marketing applications, such as defining the market for a product or deciding on the appropriate techniques to employ when targeting a certain group of consumers
The use of market segmentation strategies mean targeting a brand only to specific groups of consumers rather than to everybody- even if that means that other consumers will not be interested or may choose to avoid that brand.
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Attempt of a definition Determine homogeneous groups of potential consumers allowing to prepare an offer corresponding to their expectations. The various segmentation modes Segmentation by the age, the revenue, the creeds, the occupation, etc. (ex. The elder people) Segmentation by the using conditions, application field of the product, functionality of the product-service (ex. The 4WD drivers). Segmentation by the expectations, the purchase behavior (ex. The seeking the reassurance of after market service of a large distributor chain). Segmentation by the level of price (ex. The buyers of premium range tires).
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A market segment is a group / cluster of users / consumers sharing similar expectations as regards the usage of our products similar purchasing behavior

They will tend to purchase products showing the same technical features, at a similar range of price, bearing a consistent image appealing to them, through similar channels of distribution.
We may reach them through A communication carrying a consistent message, Identified consumer benefits, Selected distribution channels, Within a correct balance of PUSH / PULL approach, At a price / performance ratio matching their expectations, With an image valorizing their ego.
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Market segmentation Consumers within a segment are similar to one another in terms of product needs and these needs are different from consumers in other segments Important differences among segments can be identified The segment is large enough to be profitable Consumers in the segment can be reached by an appropriate marketing mix The consumers in the segment will respond in the desired way to the marketing mix designed for them In many cases, it makes a lot of sense to target a number of market segments. The likelihood is that no one will fit any given segment description exactly, and the issue is whether or not consumers differ from our profile in ways that will affect the chances of their adopting the products we are offering.
Source Consumer Behaviour A European Perspective / Michael R. Solomon
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Product
Marketing is driving the product design and conception process in order to ensure match between the offer and the demand
Ex. Avoid valueless technical features
Price
Determine the right price for the offer to meet the demand
Ex. Avoid insolvent demand
Place

Organize the distribution channel Ensure that the product is available at any moment at the place where the customer expects it to be Present the offer, its features and benefits to the distribution and the final customer Generate intention to purchase and transform intention into purchase
Promote

People Develop the required competencies
Motivate for performance
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Communication mix
Sales Promotion
Advertising Offer Mix Enterprise Products Services Prices
Sales Force
Intermediaries
Consumers
Public Relations
Direct Marketing Telemarketing, Internet
At the international, the problem is the same as on the domestic market. The problem to be solved is the one of presenting an offer adapted to targeted consumers through various channels and insuring their satisfaction. However the environment is more complex and riskier.
Graphique daprs Kotler & Dubois
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Demand
Could be latent and unexpressed
EX. Walkman
Tracing and understanding demand is the key challenge for any enterprise Which type of customer

Selection of our future customer base
Ex. The patient of an hospital is a customer for the hospital service offer Ex. The citizen is a customer for the services offered by civil servants
Which country and/or region and/or city Which segment
See. Definition of a segment
Definition of the proper balance among our customer groups
Product life cycle Market maturity Risks of new entrants and increased competition on some groups
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The offer is a complex set of product services and additional benefits for the consumer - user It can be tangible - material or intangible - virtual It can be a product and / or a service It can be monetized or free The benefits for the consumer-user may come from several sources Usability and functions of the product Measurable performance Additional technical features Endurance and alleged durability Reassurance and guaranty Image and self consciousness Design and aesthetics Etc.
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The channel is the route for the offer to reach the consumer
It is composed of a sometimes large number of intermediaries who sell and resell the product or service until it is sold finally to the consumer
Selecting the proper channel is a key strategic decision. It has a high impact

On the final cost of the product for the consumer On the communication process and the message finally conveyed to the consumer (image, instructions for use, etc.) On the conditions of services, first use, maintenance and repair Etc. We may reach them through / selected distribution channels
Importer
Wholesaler
Secondary wholesaler
Producer Cooperative National market Wholesaler
Retailer
Consumer
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Marketing Strategy

The choice of the distribution channel is strategic.
Should a company use distributors and dealers to sell its products or should it sell directly to mass merchandisers? Using both channels simultaneously can lead to problems.
Ex. In order to increase the sales of its lawn tractors and mowers, for example, John Deere decided to sell the products not only through its current dealer network, but also through mass merchandisers like Home Depot. Deere's dealers, however, were furious. They considered Home Depot to be a key competitor. The dealers were concerned that Home Depot's ability to underprice them would eventually lead to their becoming little more than repair facilities for their competition and left with insufficient sales to stay in business. Ex. Firestone tire sales through the Mass Merchandisers in the 70s, leading to a ban by Tire Specialists.
In export activity, the selection of the channel that will aloow us to reach the targeted customer is even more difficult than on domestic market. This choice is a key condition for the success of the whole program.
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Selection of the distribution channel
What are the criteria to select the proper distribution channel, in line with our corporate objectives?
Related market segment, profile of consumers reached, purchasing pattern Accessible market share, sales potential of the channel Price structure, sell-out price level Cost structure, total cost of access to the market, including logistic costs, total margin, central rebates, cost of sales support and promotion Professionalism, ability to serve the product at the required level Restrictions to entry, control by competitors, cycle time for homologation (rfrencement) Partnership possibilities, expectations from the channel and ability to serve by the manufacturer
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Marketing Strategy
There are numerous other marketing strategies. For advertising and promotion, for example, a company or business unit can choose between a "push" or a "pull" marketing strategy. Many large food and consumer products companies in the United States and Canada have followed a push strategy by spending a large amount of money on trade promotion in order to gain or hold shelf space in retail outlets. Trade promotion includes discounts, in-store special offers, and advertising allowances designed to "push" products through the distribution system. The Kellogg Company recently decided to change its emphasis from a push to a pull strategy, in which advertising "pulls" the products through the distribution channels. The company now spends more money on consumer advertising designed to build brand awareness so that shoppers will ask for the products. Research has indicated that a high level of advertising (a key part of a pull strategy) is most beneficial to leading brands in a market.
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Push / Pull marketing
In a PULL mode of market approach, a producer will create a strong direct link to its end-user / consumer base in order to generate the purchase decision directly. The distribution network is therefore confined to a passive-neutral role of supplier of the logistic (product availability) and eventually after-sales services. Pure example is the sales of cigarettes In a PUSH mode, the producer relies on the distribution network to promote the sales of its products or services to the targeted endusers / consumers and to generate the purchase decision. In this mode the producer will tend to establish a strong partner link with its selected distribution network. Pure example is the sales of medicine
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A producer of a product or a service will generally implement a suitable balance between Push and Pull marketing. If a producer has enough resource to create a strong, widely known brand, he will generally tend to gain higher control on its distribution channels (sell-out price level, margin, promotion periods and package, sales talk, etc.) and therefore reduce their role as the promoter of the product. In case of products requiring services that only the distributor is able to supply, the producer has no other choice than keeping a strong component of PUSH policies in its marketing program.
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In most cases companies operating at the early stage of their export program are compelled to use a PUSH marketing strategy. The key challenge is their ability to control the nature of their presence on the market
What is their real positioning
What is their image and how are their products perceived by the consumers
How far re they able to have a direct relationship with the final consumer in order to track properly his/her expectations and evolution of consumption pattern
A company should always try its best to reach a balance between PUSH and PULL marketing, as soon as possible

Need to reduce dependency on distribution Need to create its own customer base Need to feed a rich customer data base
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It is an extremely complex set of information, messages and incentives delivered through a multiplicity of relays and media

Information about the enterprise, its history, social values, people, etc. Advertising about its product benefits and competitive advantages Information about the product technical characteristics, composition, instructions for use
Information about related services, after sales services, maintenance and repair
Information about its distribution channel and availability Justification about its price positioning and cost-benefit Promotion and creation of incentives to generate purchase
Loyalty programs and invitation to repurchase

Media: press, pamphlets, couponing, radio, TV, Internet, billboard, stickers, phoning - letter - mail - sms, etc.
The relays are multiple

Sales force, sales talk, seminars, customer visits

Brochures and documentation, trade shows - exhibitions Public Relation
79
Building brand value

Creating value Advertising awareness Creating a strong image Consistency of message Meet consumers expectations, ego build up High positioning in the price segment Quality marketing Product Distribution and correlated services After sales services, warranty policy Cost of usage Performance / cost ratio Price control Brand power Playing smartly with purchase opportunity effect
Destroying value Inadequate product functionality, performance, reliability Excessive cost of usage Insufficient warranty and after sales services Mismatch between advertising message and target audience Inadequate media Mismatch between distribution channel and targeted consumer segment Excessive promotional activity:
Too frequent Too high offers
Uncontrolled pricing across channels (price battling)
80
Marketing Strategy

When pricing a new product, a company or business unit can follow 1 of 2 strategies. For new-product pioneers, skim pricing offers the opportunity to "skim the cream" from the top of the demand curve with a high price while the product is novel and competitors are few. Penetration pricing, in contrast, attempts to hasten market development and offers the pioneer the opportunity to use the experience curve to gain market share with a low price and dominate the industry. Depending on corporate and business unit objectives and strategies, either of these choices may be desirable to a particular company or unit. Penetration pricing is, however, more likely than skim pricing to raise a unit's operating profit in the long term.
81
The price is frequently much more than the cash out of the customer. It is determined by many factors. It is a mix

Perceived quality of the product (Ex. French Cars) Hidden quality of the product (Ex. German Cars) Additional features as far as the customer would evaluate them (Ex. Multiple programs on a washing machine) Image of the product - brand (Ex. Dolce & Gabana watches) Delivery and availability conditions (Ex; Last minute toy purchase at Xmas) Additional offered services (Ex. Darty delivery and set up) Warranty conditions - reassurance (Ex. Darty - Le contrat de confiance)
Price waterfall in distribution Production Suppliers Advertising & Promotion Storage and transport Cost Plus Market minus
Two methods for fixing the price

Competitors
Cost plus pricing Market minus pricing
The market
82
Market Minus

A decision is made as regards to sales price level to end-user / consumer without consideration for the production cost for the product. The marketing mix is fixed to reach higher corporate objectives by selecting the targeted market segment, the distribution channel, the sell-out and sell-in price level, the volume of selling and promotional expenses, etc. Starting from the sell-out price, all relevant costs are deducted down to the exfactory price level. Plants are requested to output the product in pre-defined characteristics and performance level at the requested price. It is up to them to find the productivity and process gains that will allow them to reach this cost target.
Cost plus
Plants determine the best price level that they can reach for the product meeting the required performance target. All costs and expenses are then piled up on the ex-works price. The bottom sell-in price is then determined, taking into consideration the desired gross profit and taking into consideration of the sell-out level or not. The company sees if it can sell at this price.
Most companies operating in Cost Plus mode are dead, except if they belong to the public sector
83
Brand A
Brand B
Brand C
Brand D
115
100 90 80 70 60 50 40 55 100
115
105 90 85 65 45 40 105
90
80 70
60
45
List price to consumer Net selling price to consumer Net purchase price by dealer Maker COGS
84
Consumer Tires
100 Premium 85 Bridgestone Standard Firestone Economy First Stop 65 Budget 50 85 Michelin Continental Pirelli Goodyear Dunlop Kleber Hankook Uniroyal 80 90 100
Commercial Tires
Operation Cost Bridgestone Cost Performance Firestone Initial Cost 72 Price only Michelin Goodyear
Dunlop Continental
Hankook Pirelli Toyo Barum Other Other
75
Yokohama Norauto Barum Toyo Kumho Other Other
Other
65
Positioning
The decision for positioning the offer is a key strategic decision: It means deciding at which level of the scale of prices practiced on the market we want to sell our products/services to the final consumer It drives the profitability of the company I depends only marginally on the cost of the product It depends mostly on the value of the offer for the consumer:

Brand power Product characteristics and functionality Quality and pertinence of the communication Credibility of the maker, the product Additional non-sold, services

86
The chosen positioning must be supported by the global content of the value proposition of the offer It must be consistent with the total marketing mix It must be defendable on the long term
Positioning & Pricing

100 % Hi-end Medium-end Low-end
1 2 3
Budget-end 50%
% of market
Recently many markets take the shape of an egg cup: Increasing demand of premium and luxury products, declining demand for standard products, increasing demand for cheap , low cost products
Each market segment has its own volume and price range Lower Prices do not necessarily mean higher volume
Position 1 : top end product, priced at high end of segment, offering a lot of value to justify the price Position 2 : top end product, priced at competitive level, looking for market share in its segment Position 3 : top end product wrongly priced that has fallen into a lower segment. It now becomes the higher priced product in this segment, competes against other competitors and may lose volume.
87
Three possible strategies Single price everywhere, assuming the risk of neglecting the differences in living standards Example: Sales of CD on Internet; Louis Vuitton or Swatch pricing
A price adapted to the demand of each market, assuming the risk of parallel market Example: car sales in Europe A price taking into account the cost structure on each market Example: sales of bulky products, sales into the French DOM
Source Kotler & Dubois
88
Pricing
Competitors in each product category for each country
100% Country 1 Country 2 Country 3
Hiend
BS FS
MI / GY MI / Conti MI / PI MI Cl./ Dunlop Klber Viking MI Cl./ GY
MI Cl./ GY
Lowend
Dayton / PB Budget
% of market
Hankook Klber India
Budget -end
50%
Korea
Brands need to be positioned by segment Once positioned, target competitor(s) identified Be careful of price changes by target competitors, as they may change segment.
89
Pricing across Europe
Country 1 Eur. Target Retail Price Target GP
Country 2
Country 3
Retail Price Spread

Net Net Price Spread
Distributor A Distributor B Distributor C Distributor D
Net purchase price All incentives and promotions deducted
90
Risks in Competitive Strategies No one competitive strategy is guaranteed to achieve success, and some companies that have successfully implemented one of Porters competitive strategies have found that they could not sustain the strategy. Each of the generic strategies has its risks.
For example, a company following a differentiation strategy must ensure that the higher price it charges for its higher quality is not priced too far above the competition, otherwise customers will not see the extra quality as worth the extra cost. Ex. Michelin in Europe
This is what Is meant by cost proximity.
Source : Strategic Management David Hunger / Thomas Wheelen
91
The Internationalization process: the steps to Export
92
Agenda of Export section
1.
The Strategic Steps The techniques of International Trade The Impact of export on corporate offer, operations and organization Conclusion: another business as usual
2.
3.
4.
93
What are the reasons that lead a company to start exporting?
Growth, capturing new markets Small or saturated home market Keep up with their competitors Maturity of domestic market
To diversify their offer

Reduce the cost: economies of sale, acquire critical mass Take advantage of lower taxes in other country Identified a niche in the other market and opportunity to cover Surplus of production in their home market Avoid dependency on one market, spread the risk Better supply chain management Reduce customs and taxes Main long-term reason: grow, gain distinctive competencies, strengthen resources and organization: be prepared for the invasion
94
If a company is operating in an industry populated with NOMAD firms, it must grow international to gain power and competitiveness to be able to resist when a foreign new entrant will penetrate its market
Not a matter of if: in a globalized world a nomad firm from abroad will certainly attempt to capture its market Only SEDENTARY firms, by definition, will not fear the international competition until its industry moves into the open area and becomes a branch belonging to nomad firms It does not mean that they should not adopt a growth strategy on international market
95
Internationalization
Trying a definition Effort to increase the size of ones market through the conquest of foreign markets.
Sell existing products to an enlarged customer base
Development of a specific international marketing
Adapt the offer to specific requirements of various markets

International Supply Chain International subcontracting, seek for better costs
Develop purchase from foreign countries

Organizational change aiming at better coordinating the activity in several countries

Take into account the legal, linguistic and other differences Organization of an export department, of a foreign representative or franchised distributor Organization of the international Supply Chain
96
I. The Strategic Steps
97
2 - The Strategic Steps: A methodology for study

Corporate objectives and marketing objectives Confirmation of project objectives Information phase Analysis phase Decision phase Action phase
Check market size and potential
Check barriers to entry
Analysis of environment
Detailed market and competitive analysis
Design implementation plan

marketing plan organization logistics Others
Feasibility study, Validation of expected ROI
Decision
to go
Implementation phase
98
1- Environment scanning External / Internal

The diagnostic
99
1 - The Strategic Steps: Diagnostic
Drive the internal and external diagnostic
Our Strengths and Resources

Our Weaknesses and Limitations Our Competitive Advantage
See Competitive advantage
Product - Innovation - Distinctive features

Brand - Image - Communication - Promotion Price
Channel and partners
Our Organization Our Production Tool - Global Competitiveness Our Supply Chain - Effective Customer Response Our Financial Resources
100
Core competencies and Distinctive Competencies
Resources are the organization's assets and are thus the basic building blocks of the organization. They include physical assets, such as plant, equipment, and location, human assets, in terms of the number of employees and their skills, and organizational assets, such as culture and reputation. Capabilities refer to a corporations ability to exploit its resources. They consist of business processes and routines that manage the interactions among resources to turn inputs into outputs. For example a companys marketing capability can be based on the interaction among its marketing specialists, information technology, and its financial resources. A capability is functionally based and is resident in a particular function, such as marketing capabilities, manufacturing capabilities and human resource management capabilities.
101
Core competencies and Distinctive Competencies
A competency is a cross-functional integration and coordination of capabilities.
For example, a competency in new product development in one division of a corporation may be the consequence of integrating MIS capabilities, marketing capabilities, R&D capabilities, and production capabilities within the division.
A core competency is a collection of competencies that cross divisional boundaries, are widespread within the corporation, and is something that a corporation can do exceedingly well. Thus new product development would be a core competency if it goes beyond one division.
FedEx has a core competency in its application of information technology to all of its operations.
102
Core competencies A definition
Core competencies Those assets, people, knowledge or expertise that constitute our strengths and ensure our competitiveness on the market. The specific profession in which we excel as a specialist. A core competency is something that a corporation can do exceedingly well. It is a key strength. It may also be called a core capability because it includes a number of constituent skills.
For example, a core competency of Avon Products is its expertise in doorto-door selling. FedEx has a core competency in information technology.
Although it is typically not an asset in the accounting sense, a core competency is a valuable resource: it does not wear out" with use. In general, the more core competencies are used, the more refined they get and the more valuable they become.
103
Core Competencies
A company must continually reinvest in its core competencies or risk losing them. When these competencies or capabilities are superior to those of the competition, they are called distinctive competencies.
General Electric. for example, is well known for its distinctive competency in management development. Its executives are sought out by other companies hiring top managers. Bridgestone has a distinctive competency in managing production plants: especially their 10 plants in Japan are a competitive advantage recognized by their competitors (production efficiency, quality, flexibility)
104
Distinctive Competencies
To be considered a distinctive competency, the competency must meet 3 tests:

1.
Customer Value: It must make a disproportionate contribution to customer-perceived value. Competitor Unique: It must be unique and superior to competitor capabilities. Extendibility: It must be something that can be used to develop new products/services or enter new markets.
2.
3.
Even though a distinctive competency is certainly considered a corporation's key strength, a key strength may not always be a distinctive competency. As competitors attempt to imitate another company's competence in a particular functional area, what was once a distinctive competency becomes a minimum requirement to compete in the industry. Even though the competency may still be a core competency and thus a strength, it is no longer unique.
105

Where do these competencies come from? A corporation can gain access to a distinctive competency in 4 ways: 1. It may be an asset endowment, such as a key patent, coming from the founding of the companyXerox grew on the basis of its original copying patent. 2. It may be acquired from someone elseWhirlpool bought a worldwide distribution system when it purchased Philips's appliance division. 3. It may be shared with another business unit or alliance partnerApple Computer worked with a design firm to create the special appeal of its Apple II and Mac computers. 4. It may be carefully built and accumulated over time within the companyHonda carefully extended its expertise in small motor manufacturing from motorcycles to autos and lawnmowers.
106
For core competencies to be distinctive competencies, they must be superior to those of the competition. As more industries become hypercompetitive, it will be increasingly difficult to keep a core competence distinctive. These resources are likely either to be imitated or made obsolete by new technologies. For a functional strategy to have the best chance of success, it should be built on a distinctive competency residing within that functional area. If a corporation does not have a distinctive competency in a particular functional area, that functional area could be a candidate for outsourcing.
107
Competitive advantage a definition
Competitive advantage

Those competencies which belong specially to us

That are defendable over the long term That cannot be easily imitated or acquired by our competitors
108
A model of competitive advantage

Resources
Distinctive competencies
Cost advantage or Differentiation advantage
Value creation
Capabilities
A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage) over its rivals, or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.
109
Source: quickmba
Determining the sustainability of an advantage
Just because a firm is able to use its resources and capabilities to develop a competitive advantage does not mean it will be able to sustain it. Two characteristics determine the sustainability of a firms distinctive competency(ies) : durability and imitability Durability is the rate at which a firms underlying resources and capabilities (core competencies) depreciate or become obsolete.
New technology can make a companys core competency obsolete or irrelevant.
110
Two characteristics determine the sustainability of a firms distinctive competency(ies) : durability and imitability Imitability is the rate at which a firms underlying resources and capabilities (core competencies) can be duplicated by others. To the extent that a firms distinctive competencies gives it competitive advantage in the marketplace, competitors will do what they can to learn and imitate that set of skills and capabilities.
Competitors efforts may range from reverse engineering (taking apart a competitors product in order to find out how it works), to hiring employees from the competitor, to outright patent infringement.
111
A core competency can be easily imitated to the extent that it is transparent, transferable, and replicable. Transparency is the speed with which other firms can understand the relationship of resources and capabilities supporting a successful firms strategy.
Ex. Gillette Sensor razor was very difficult to copy, even through reverse engineering
Transferability is the ability of competitors to gather the resources and capabilities necessary to support a competitive challenge.
Ex. It may be difficult for a wine maker to duplicate a French winerys key resources of land and climate, especially if the imitator is located in Iowa
Replicability is the ability of competitors to use duplicated resources and capabilities to imitate the other firms success.
Ex. Wal-Mart ability to reduce costs and improve service level by crossdocking. Although they have basically the same type of stores and personnel, they manage their resources for maximum productivity.
112
Lesson learned
A strategy must be based on the company Strength, (distinctive competencies and competitive advantage, if any), and Opportunities. Working hard on correcting weaknesses can allow you, to the best, to attain an average level of performance, nothing likely to provide a competitive edge.
113
2 -The Strategic Steps: A methodology for study
Selection of the targeted market

Estimation of the present potential Forecast of the future potential Assessment of the potential market share Assessment of provisional costs and profit Estimation of the return on investments Indirect export, Local export agent Direct export, Foreign import agent Sales of license rights, franchise, local manufacturing, management contract Partnership, joint venture Direct investment, delocalized production unit
Selection of the access mode

Work out an international marketing plan
Level of adaptation of the mix, Expansion or adaptation of the product offer and the promotion Pricing strategies for single price, adapted pricing, cost-plus local pricing, market minus pricing, control of the spread (parallel import, cannibalization) Distribution channel: importer, wholesaler, retailer, direct sales, etc. Organize logistics and services
Export department International division The global firm
Select an organization mode

114
International Portfolio Analysis
Selection of the targeted country
IV Strategy Formulation 115
Functional Strategy
Capitalizing on the companys distinctive competencies, we will design the Functional Strategies that will allow us to make our international expansion program a success.
Functional strategy is the approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage. Just as a multidivisional corporation has several business units, each with its own business strategy, each business unit has its own set of departments, each with its own functional strategy.
116
Functional Strategy

Functional strategy Just as a competitive strategy may need to vary from 1 region of the world to another, functional strategies may need to vary from region to region. When Mr. Donut expanded into Japan, for example, it had to market donuts not as breakfast, but as snack food. Because the Japanese had no breakfast coffee-and-donut custom, they preferred to eat the donuts in the afternoon or evening. Mr. Donut restaurants were thus located near railroad stations and supermarkets. All signs were in English to appeal to the Western interests of the Japanese.
117
3 - The Strategic Steps: Build a marketing plan
Although almost every function of the company is potentially impacted by the international expansion, we will concentrate on the marketing function, in this marketing plan. Other functions potentially impacted could be: Supply Chain and Logistics system: new warehouses, new inventory systems, new transportation, etc. Manufacturing: increased capacity, higher flexibility and adaptability of the production facilities Human Resource Management: hiring people from foreign country, develop competencies and need for training, change the company culture, etc. Legal and Tax: master foreign country specific rules and practices Information system: expand power of the system, new multidimensional data base, new networks and security systems, etc. The impact on other company functions will be examined later
118

Outline of a marketing plan
1. 2. 3. 4. 5.
Executive summary The challenge and corporate objectives Situation analysis Market Segmentation Alternative marketing strategies and selected marketing strategy
Product

6.
Price - Positioning
Distribution Promotion
Short & Long-Term projections
Source: Adapted from quickmba
119

1.
Executive summary
A high-level summary of the marketing plan Brief description of product to be marketed and associated goals, such as sales figures and strategic goals
2.
The challenge
3.
Situation analysis Company analysis

Goals Focus Culture Strengths
Weaknesses
Market Share Number Type Value drivers Decision process Concentration of customer base for particular products
Customer analysis

120

3.
Situation analysis
Competitor analysis

Market position Strengths Weaknesses Market share
See Analysis of the Competition
Collaborators - Partners

Subsidiaries Joint ventures Distributors Etc.
Climate
PEST analysis

Political and legal environment Economic environment Social and cultural environment Technological environment
121
Analysis of the Competition
Which competition?

Direct competition: a very similar product offered with a similar marketing mix Indirect competition (substitutable)

A wooden product or a metallic product may compete against a plastic product A PS3 console may compete against a Blue Ray DVD player Fundamental important of the export cost price to compare with the market price set by local competitors (or foreign competitors already established) Generally the multiplication coefficient is the same If the Ex Works cost price is the same cost price delivered to local distribution is the same (except transport) The difference will be made by

Local competition
French competition

Quality Service Fundamental role of the local intermediary (importance of channel selection)
Foreign competition

Where shouldnt we go? Ex. Monofilament fishing nets: we stop whenever we face Asiatic competition
122

3.
Situation analysis SWOT analysis: a SWOT analysis of the business environment can be performed by organizing the environmental factors as follows: The firms internal attributes can be classed as strengths and weaknesses The external environment presents opportunities and threats
Tracing our Strengths Tracing our Weaknesses Minimizing our Weaknesses or Gaining Competencies to take benefit from Opportunities
Tracing our Opportunities
Make use our of Strengths to take benefit from Opportunities
Tracing our Treaths
Make use of our Strengths to reduce the Threats
Minimizing our Weaknesses and reduce Treaths by taking a different course
123
Situational Analysis: SWOT Analysis
SWOT analysis should not only result in the identification of a corporations distinctive competencies the particular capabilities and resources that a firm possesses and the superior way in which they are used but also in the identification of opportunities that the firm is not currently able to take advantage of due to a lack of appropriate resources. It can be said that the essence of strategy is opportunity divided by capacity. An opportunity by itself has no real value unless a company has the capacity (i.e. resources) to take advantage of that opportunity. This approach, however, considers only opportunities and strengths when considering alternative strategies. By itself a distinctive competency in a key resource or capability is no guarantee of competitive advantage. Weaknesses in other resource areas can prevent a strategy from being successful.
124
SWOT
A strategy may be developed by using a firm's strengths to exploit the opportunities that exist. For example, a strong brand name may be used to extend a firm's products into new markets. It may also use these strengths to protect itself against threats; for example, a retailer may use its finance to acquire key locations to prevent a competitor buying them. A firm may also want to protect itself against its weaknesses. For example, it may try to find alternative suppliers to reduce an overreliance on a particular one; it may invest in a rebranding exercise to reposition itself.
125
Source: Oxford University Press ESC Bretagne Brest - Globalization and Corporate Strategies

4.
Market segmentation Segment 1

Description Percent of sales What they want How they use the product Support requirements How to reach them Acceptable price bracket Price sensitivity
Segment 2

Description Percent of sales What they want How they use the product Support requirements Etc.
126

5.
Selected marketing strategy Discuss why the strategy was selected Present the marketing mix decisions (4 Ps) Product: The product decisions should consider the products
advantages and how they will be leveraged. Product decisions should include
Brand name Quality Scope of the product line Warranty Packaging

Brand A
115 100 90 80 70 60 50 40 55 45 45 40 80 70 100 90 85
Price: Discuss pricing strategy, expected volumes and decisions for

the following pricing variables

Brand B
115 105 105 90
Brand C
Brand D
List price Discounts Bundling Payment terms and financing options Leasing options
65 60
127

5.
Selected marketing strategy
Distribution (Place): decision variable include

Distribution channels, such as direct, retail, distributors & intermediaries Motivating the channel Ex. Distributor margins Criteria for evaluating distributors Logistics, including transportation, warehousing and order fulfillment Advertising, including how much and which media
Promotion
Public relations
Promotional programs Budget. Determine break-even point for any additional spending Projected results of the promotional program
128

6.
Short & Long-term projections
The selected strategys immediate effects, expected long-term results and any special actions required to achieve them. This section may include forecasts of revenues and expenses as well as the results of a break-even analysis Prepare the provisional Profit & Loss Account and determine the return on investment
7.
Conclusion
129
4 - The Strategic Steps: Deploy
Confirm targets to be achieved and calendar
Confirm the feasibility and return on investment through provisional

Profit & Loss Account
Launch deployment of the plan step by step Control schedule and costs at each steps Take corrective actions in case of deviation
Update plan through a rolling plan year on year
Strategic Plan calendarized by semester
130
Business Plan - Resource
Business Plan
Year 1 - 1H Year 1 - 2H 14 300 000
Year 1 - Total
Year 2 - 1H
Year 2 - 2H
Year 2 - Total
Year 3-1H
Year 3 - 2H
Year 3 - Total 27 315 600 3%
Market demand Growth Target Units Market Share Average unit Price List Discount Net Net Sales Cost of Goods sold COGS % Margin Margin %
11 700 000
26 000 000 11 934 000 14 586 000
26 520 000 12 292 020 15 023 580 2%
29 250 0,25%
48 750 0,34%
78 000 0,30%
47 736 0,40%
111 384 0,76%
159 120 0,60%
92 190 0,75%
180 966 1,20%
273 156 1,00%
200 25% 150 4 387 500 3 071 250 70% 1 316 250 30,0%
200 25% 150 7 312 500 5 118 750 70% 2 193 750 30,0%
206 25% 154,5
206 25% 154,5
212 30% 148,5
212 30% 148,5
11 700 000 8 190 000
7 375 212 17 208 828 5 347 029 12 476 400 72,50% 72,50% 4 732 428 27,5%
24 584 040 13 692 634 26 878 134 17 823 429 10 269 476 20 158 600
75% 75% 6 719 533 25,0%
40 570 768 30 428 076
3 510 000 30,0%
2 028 183 27,5%
6 760 611 27,5%
3 423 159 25,0%
10 142 692 25,0%
131
Business Plan - Sales composition

Business Plan
Year 1 - 1H Year 1 - 2H 14 300 000
Year 1 - Total 26 000 000 78 000 0,30%
Year 2 - 1H 11 934 000
Year 2 - 2H 14 586 000
Year 2 - Total 26 520 000 2% 159 120 0,60%
Year 3 - 1 H 12 292 020
Year 3 - 2H 15 023 580
Year 3 - Total 27 315 600 3% 273 156 1,00%
Market demand Growth Target Units Market Share Average unit Price List Discount Net
11 700 000
29 250 0,25% 200 25% 150 4 387 500 3 071 250
48 750 0,34% 200 25% 150 7 312 500 5 118 750 70% 2 193 750 30,0%
47 736 0,40% 206 25% 154,5
111 384 0,76% 206 25% 154,5 17 208 828 12 476 400 72,50% 4 732 428 27,5%
92 190 0,75% 212 30% 148,5
180 966 1,20% 212 30% 148,5 26 878 134 20 158 600 75% 6 719 533 25,0%
Net Sales Cost of Goods sold COGS % Margin Margin %
11 700 000 8 190 000 3 510 000 30,0%
7 375 212 5 347 029 72,50% 2 028 183 27,5%
24 584 040 17 823 429 6 760 611 27,5%
13 692 634 10 269 476 75% 3 423 159 25,0%
40 570 768 30 428 076 10 142 692 25,0%
70% 1 316 250 30,0%
Customer outlets Potential In-House-Share Sales / Outlet Number of outlets
2500 5% 125 234
2500 8% 200 244 239
3000 10% 300 159
3000 10% 300 371 265
3500 12,5% 437,5 211
3500 12,5% 437,5 414 312
132
Business Plan - Organization
Business Plan
Year 1 - 1H Year 1 - 2H
Year 1 - Total
Year 2 - 1H
Year 2 - 2H
Year 2 - Total Year 3 - 1 H
Year 3 - 2H
Year 3 - Total
Headcount Managing Director Sales manager Salesmen Outlets / Head Finance & Admin. Order Desk Outlets / Head Human Resource Total Headcount Average cost / Head included) (all Total Payroll
1 4 60 1 2 120 0
1 4 60 1 2 150 0
1 1 4 70 2 1 150 1
1 1 5 70 2 2 150 1
1 1 5 80 3 2 160 1
1 1 5 80 3 3 160 2
8 8 30 000 30 000 1 413 000 1 383 750
10 13 27 500 27 500 2 796 750 1 670 345 2 108 568
14 15 25 000 25 000 3 778 913 2 066 880 2 213 352
4 280 232
133
Business Plan - Costs
Business Plan
Year 1 - 1H Year 1 - 2H 100 000 1 237 656 3,25% 182 250 5 6000 54 675 120 15 15 000 731 250 5% 5% 1 000 2 500 2 000 2 500 2 500 2 500 2 479 925
Year 1 - Total 200 000 380 250 358 650
Year 2 - 1H 100 000 1 239 694 3,25% 218 250 6 6000
Year 2 - 2H 200 000 2 430 221 2,50% 262 944 7 6000 82 170 125 15 15 000 1 548 795 4% 5% 2 000 3 500 3 500 3 500 3 500 3 500 4 236 977
Year 2 - Total 300 000 669 915 481 194
Year 3 - 1 H 200 000 2 342 316 2,50% 262 944 7 6000
Year 3 - 2H 300 000 3 470 367 1,75% 258 136 7 6000 83 894 130 15 22 500 2 150 251 3% 5% 3 000 4 500 5 000 4 500 4 500 4 500 5 054 133
Year 3 - Total 500 000 812 683 521 080
Logistics
Warehousing # Warehouses Delivery cost Cost / NS% # Vehicles Cost / vehicle
100 000 1 142 594 3,25% 176 400 5 6000 52 920
Automotive
Travel Cost per day # days / head / month Rent Sales Promotion & Advertising Advertising / NS % Promotion / NS % Office Supplies Communication Depreciation Legal & Tax Outside services Other expenses Total Opex
107 595
68 203 125 15
150 373
85 457 130 15
169 351
120 15 15 000 438 750 5% 5% 1 000 2 500 2 000 2 500 2 500 2 500 2 209 070
30 000 1 170 000
15 000 663 769 4% 5%
30 000 2 212 564
22 500 1 095 411 3% 5%
45 000 3 245 661
2 000 5 000 4 000 5 000 5 000 5 000 4 688 995
2 000 3 500 3 500 3 500 3 500 3 500 2 755 067
4 000 7 000 7 000 7 000 7 000 7 000 6 992 043
3 000 4 500 5 000 4 500 4 500 4 500 3 759 192
6 000 9 000 10 000 9 000 9 000 9 000 8 813 325
134
Business Plan - P&L Summary

Business Plan
Year 1 - 1H Year 1 - 2H 7 312 500 5 118 750 70% 2 193 750 30,0% 1 383 750 100 000 1 237 656 3,25% 182 250 54 675 15 000 731 250 1 000 2 500 2 000 2 500 2 500 2 500 2 479 925 -286 175
Year 1 - Total Year 2 - 1H 11 700 000 8 190 000 3 510 000 30,0% 2 796 750 200 000 380 250 358 650 107 595 30 000 1 170 000 2 000 5 000 4 000 5 000 5 000 5 000 4 688 995 -1 178 995
7 375 212 5 347 029 72,50% 2 028 183 27,5% 1 670 345 100 000 1 239 694 3,25% 218 250 68 203 15 000 663 769 2 000 3 500 3 500 3 500 3 500 3 500 2 755 067 -726 883
Year 2 - 2H 17 208 828 12 476 400 72,50% 4 732 428 27,5% 2 108 568 200 000 2 430 221 2,50% 262 944 82 170 15 000 1 548 795 2 000 3 500 3 500 3 500 3 500 3 500 4 236 977 495 451
Year 2 - Total 24 584 040 17 823 429 6 760 611 27,5% 3 778 913 300 000 669 915 481 194 150 373 30 000 2 212 564 4 000 7 000 7 000 7 000 7 000 7 000 6 992 043 -231 432
Year 3 - 1 H 13 692 634 10 269 476 75% 3 423 159 25,0% 2 066 880 200 000 2 342 316 2,50% 262 944 85 457 22 500 1 095 411 3 000 4 500 5 000 4 500 4 500 4 500 3 759 192 -336 033
Year 3 - 2H 26 878 134 20 158 600 75% 6 719 533 25,0% 2 213 352 300 000 3 470 367 1,75% 258 136 83 894 22 500 2 150 251 3 000 4 500 5 000 4 500 4 500 4 500 5 054 133 1 665 400
Year 3 - Total 40 570 768 30 428 076 10 142 692 25,0% 4 280 232 500 000 812 683 521 080 169 351 45 000 3 245 661 6 000 9 000 10 000 9 000 9 000 9 000 8 813 325 1 329 367
Net Sales Cost of Goods sold COGS % Margin Margin % Total Payroll Logistics Warehousing # Warehouses Delivery cost Cost / NS%
4 387 500 3 071 250 70% 1 316 250 30,0% 1 413 000 100 000 1 142 594 3,25% 176 400 52 920 15 000 438 750 1 000 2 500 2 000 2 500 2 500 2 500 2 209 070 -892 820
Automotive Travel Rent Sales Promotion & Advertising Office Supplies Communication Depreciation Legal & Tax Outside services Other expenses Total Opex NPBT
135

Business Plan
Year 1 - Total Net Sales Cost of Goods sold Margin Total Payroll Logistics 11 700 000 8 190 000 3 510 000 30,0% 2 796 750 200 000 380 250 Automotive 358 650 Year 2 - Total Year 3 - Total 24 584 040 17 823 429 6 760 611 27,5% 3 778 913 300 000 669 915 481 194 40 570 768 30 428 076 10 142 692 25,0% 4 280 232 500 000 812 683 521 080
Travel
107 595
150 373
169 351
Rent
30 000
30 000 2 212 564
45 000 3 245 661
Sales Promotion & Advertising 000 1 170
Office Supplies Communication Depreciation Legal & Tax Outside services Other expenses Total Opex NPBT
2 000 5 000 4 000 5 000 5 000 5 000 4 688 995 -1 178 995
4 000 7 000 7 000 7 000 7 000 7 000 6 992 043 -231 432
6 000 9 000 10 000 9 000 9 000 9 000 8 813 325 1 329 367
136
II. The techniques of International Trade
137
1 - The techniques of International Trade Supporting organisms
Existing support organisms

Information and advice Custom statistics Norms, Patents and industrial property Technical cooperation Lobbying Prospection Foreign direct investment Information et marchs

UBI France
Librairie du commerce international Projets et appels doffres internationaux Rglementations, formalits, contrats, brevets Etudes sur mesure Veilles personnalises Sminaires marchs
Contacts commerciaux Missions conomiques Cap Export: les aides PME / TPE SIDEX - Les aides financires destines aux PME / TPE Bnficier du label France Les groupements de PME lexport
138

COFACE & COFACE Services
Assurance

Assurance crdit Assurances prospection Assurances risque de change Autres garanties
Affacturage Notation et information dentreprises Gestion des crances Procdures publiques
139
COFACE
Coface has been privatized and is now a subsidiary of NATIXIS Group. The company is undergoing an important reorganization, dividing the functions between two separate entities: COFACE will concentrate on insurance activities COFACE service will offer company information and evaluation services, debt recovering and solution data.
140

OSEO Bnficiaires
PME(*) constitues en socit, cres depuis plus de trois ans, souhaitant se dvelopper lexport et linternational. Les entreprises peuvent dj avoir une activit ltranger, ou y accder pour la premire fois.
Finalit
Financer les programmes dinvestissements visant au dveloppement de lactivit lexportation ou limplantation ltranger.
Dpenses finances Le Contrat de Dveloppement International finance prioritairement :

les investissements immatriels : frais dadaptation des produits et services aux marchs extrieurs, cots de mise aux normes, dpenses de prospection, participation aux foires et salons, recrutement et formation de lquipe commerciale export, dpenses de communication, frais dchantillonnage, frais de transferts de matriels,
Les investissements faible valeur de gage :

matriels spcifiques, moules, matriel informatique,
Laugmentation du besoin en fonds de roulement gnre par le projet de dveloppement : constitution des stocks pour lexport, Modalits d'intervention Prt :
sans garantie sur les actifs de lentreprise, ni caution personnelle du dirigeant, de 40 000 400 000 euros, dune dure de six ans, avec un allgement du remboursement la premire anne. Ce prt accompagne un concours bancaire qui peut tre garanti 60 % par le Fonds de Garantie International dOSEO.
(*) Au sens de la dfinition europenne de la PME : entreprise de moins de 250 salaris dclarant soit un CA annuel
infrieur 50 millions , soit un total de bilan n'excdant pas 43 millions . Elle doit tre indpendante, c'est--dire ne pas tre dtenue plus de 25% par une ou plusieurs entits qui ne sont pas des PME.
141
142
Banks
143
Chamber of Commerce offer a variety of services
Expert advices Training programs Collective shows and exhibitions Collective missions of prospection
144
2 - The techniques of International Trade - Specificities
TACE - Techniques Administratives du Commerce Extrieur (Administrative Techniques for International Trade)

Customs Logistic International payments

Simple collection Payment against documents Credit against documents standby letter of credit Delivery against payment factoring, forfaitage, Guarantee and guarantor Exchange risks Exchange risk insurance advance in foreign currency Forward buying/selling foreign currency Exchange option
145
2 - The techniques of International Trade - Specificities
International contracts

The context of international law The contracts Trade agent Concession - Distributorship Sale

Consumer goods Capital goods Services
Franchise
Joint Venture Settlement of litigations: the International arbitration
146
3 - The techniques of International Trade - Prospection

Finance the pre-study and prospection effort Trace the needs, understand the specific requirements of the targeted consumers Adapt the product

Norms Marketing constraints Plan and budget Look for support and aides Protect brands and patents Get ready for the prospection trip List importers Look for suppliers Prepare adapted commercial tools: Leaflets, Technical data sheets, Sales talk and arguments, Web site, General sales terms and conditions Product costing at export destination and offered price Set up corporate organization Trade shows abroad The export offer Logistic organization and services Selection of a distribution channel Follow up and animation of the distribution channel
Define a commercial policy

147
4 - The techniques of International Trade Risks and Solutions
International trade
Each step generates a specific additional risk For every risk, exists a solution Risk: commercial failure Solution: Assurance-Prospection COFACE Principle: Refundable advance of 65% of the prospection expenses, reimbursement of the advance at a later stage in case of success Risk: Abusive recourse to guarantees (Bid Bond, guarantee of reimbursement of deposit Solution: Assurance Risque de Fabrication COFACE Principle: reimbursement at the cost value of a product partially manufactured and not sold Risk: increase of the cost price Solution: Clause de rvision
Prospection

Offer / signature of the contract

148
Transport Risk: transported goods Solution: company insurance, COFACE, GATEX Invoicing Risk: debtor insolvency (unpaid debt) Solutions: Assurance-Crdit COFACE principle: reimbursement of the unpaid debt Documentary credit principle: commitment to pay by the bank of the customer (sub-condition) Factoring principle: global transfer of the customers account Forfaitage principle: transfer of some selected customer debts Bank guarantee Securities Guarantees Documentary remittance
149
Delivery

Risk: Abusive release of guarantee clauses (Performance Bond) Solution: Guarantee by COFACE against such release Risk: Exchange risk Solutions:

Payment

Assurance Risque de change COFACE
principle: reimbursement of the exchange loss principle: purchase / sale of currency at a rate fixed in advance principle: loan in foreign currency pre-financing the export principle: possibility to sell (put) or buy (call) foreign currency at a preset ratei
Forward purchase / sale of foreign currency
Advance in foreign currency
Exchange option
Risk: Politic, Catastrophic and Non-transfer Solution: Insurance COFACE PCT Final reception (end of the warranty period) Risk: abusive recourse to guarantee (Retention Money Bond) Solution: Guarantee COFACE against such abusive recourse to guarantee
150
Political risk
see MOCI yearly "risques pays" in collaboration with COFACE
151
Commercial risks
There is a risk to allow an agent or an importer to learn and get experience from us and then to see him turning to another supplier
It is generally noticed that the it is likely that we will have to cut relationship with our initial partner at a later stage in order to gain direct control over the marketing
process in the foreign country
Therefore the classical approach is to grant an exclusivity during a limited, but relatively long period to get the partner full commitment but to be able to break when necessary
Industrial risk
The risk is to be stolen our specific know-how or techniques, or permit our customer to create the market and invest into the production tool when the breakeven level is reached
Ex. Danone in China
152
Financial risk

See COFACE
If there is an existing protocol (reserve for emerging markets), the

risk is carried by the bank in case of buyer credit
See solutions

Credit risk => insurance credit or crdoc (documentary credit) Exchange risk => insurance, option, forward selling Investment risk => guarantee of foreign investment
153
Risk and Control

Im portance of risk O ption Investm ent Econom ic & political risk Very Low Adaptation to com m ercial barriers Low Com m ercial issue S tability of relations Very Low Availability of inform ation Very Low Control
Indirect Very Low exportation D irect exportation B y export dpt. Medium B y representatives Low B y im porter Very Low B y sales office Medium S ettlem ent without financial engagem ent License Low Franchise Medium Manufacturing Very Low contract Managem ent Low contract S ettlem ent with financial engagem ent Joint- venture Medium P lant abroad H igh
Very Low
Medium Low Very Low Medium
Low Low Low Medium
Medium Low Low Medium
Medium Medium Low H igh
Low Medium Very Low Medium
Medium Low H igh Medium
H igh Medium Medium Medium
Low Medium Medium Medium
Low H igh Medium H igh
Very Low Medium Low Medium
Medium H igh
H igh H igh
Medium H igh
H igh H igh
H igh H igh
154
Idea
The SME (small and medium enterprises) which aim at getting international and start exporting enter into a relatively standardized process
Internationalization: export move and/or purchase from abroad

Mode: export department Utilization of classical tools and process: International exhibitions: look for partners Support to export Organisms: COFACE, OSEO, UBI France, etc. Prospection, Market research, funding support and insurance procedures Prospection trips, follow up, understanding of the market Analysis of the environment (customs, protection, non tariff barriers, etc.) Analysis of the market, selection of the target market Building up the export offer, adaptation of the product, marketing constraints Logistic Analysis of strengths and weaknesses, risks and competition Export project: business plan and return on investment Matrix Investment - Risks / Control Evolution of the relations with the initial partner
155
Idea
In essence, the export activity is the continuation of the domestic activity
It remains a matter of preparing a competitive offer to new potential customers and generate the demand through proper marketing mix It is the continuation of a growth process that is vital for any enterprise
However it raises many new challenges
The customers are new and do not share the same culture, creeds and needs
The partners are new The environment (legal, economic, social, regulatory, practices, etc.) is new The competitors are new The distribution channels might be different The purchasing pattern and customers expectations might be different The using conditions for the product could be different, more severe Etc.
The challenge is the unknown
Risks vs. Control
156
III. The Impact of Export on the Corporate Offer, Operations and Organization
157
The steps to internationalization

Selection and study of the market Elaboration of the marketing plan Specific line of products Pricing and payment policy Distribution policy Advertising Communication Staffing Commercial action
Selection and set up of the exclusive importer
Rupture of the contract and set up of regional distributors (agents)
Organization of a network of distribution direct
Direct deliveries
Organization of the local logistic
Creation of the local representation office
Creation of the commercial subsidiary
Local sub-contracting
Industrial installation
Period of the export department
Period of the international matrix structure
158
Impact on corporate offer

The internationalization process: export from home base to foreign markets
1.
The impact of the internationalization process

a) b)
c)
A new environment New competitors New customers with possibly different expectations
2.
Global call into question for the offer and the mix
a) b) c) d)
Product mix Customer mix Channel mix Communication mix
3.
Call into question for the support functions

a) b)
Supply chain Back office
159
Impact on Organization, Supply Chain and Back Office
Organization Setting up the export team Running the export department - allocating resource between export and domestic business Moving from a product line organization to a geographic organization The matrix organization - Multicultural company Supply Chain Managing export flow Managing local distribution in foreign countries Managing global in & out flows Back Office International marketing department International tax and legal affairs International accounting rules International Human Resource management
160
MD
Organization
MD
Manufacturing Director
Commercial Director
Finance & Administration Director
Manufacturing Director
Supply Chain Director
Sales & Marketing
Finance & Administration Director
Domestic Sales
Export Sales
Product Line A
Product Line B
Product Line C
MD
Business Unit America
Business Unit Europe
Business Unit Asia
R&D
Manufacturing
Supply Chain
Sales & Marketing
CFO
161
International Issues in Staffing
Implementing a strategy of international expansion takes a lot of planning and can be very expensive. Nearly 80% of midsize and larger companies send their employees abroad and 45% plan to increase the number they have on foreign assignment. A complete package for 1 executive working in another country costs from $300,000 to $1 million annually. Nevertheless. between 10% and 20% of all U.S. managers sent abroad returned early because of job dissatisfaction or difficulties in adjusting to a foreign country. Of those who stayed for the duration of their assignment, nearly onethird did not perform as well as expected. One-fourth of those completing an assignment left their company within 1 year of returning homeoften leaving to join a competitor. One common mistake is failing to educate the person about the customs in other countries.
162
Out of their study of 750 U.S.. Japanese, and European companies. Black and Gregersen found that the companies that do a good job of managing foreign assignments follow 3 general practices.
When making international assignments, they focus on transferring knowledge and developing global leadership.
They make foreign assignments to people whose technical skills are matched or exceeded by their cross-cultural abilities.
They end foreign assignments with a deliberate repatriation process with career guidance and jobs where the employees can apply what they learned in their assignments.
163
Another approach to staffing the managerial positions of multinational corporations is to use people with an "international" orientation, regardless of their country of origin or host country assignment. This is a widespread practice among European firms.
For example. Electrolux. a Swedish firm, had a French director in its Singapore factory.
Using third-country "nationals" can allow for more opportunities for promotion than does Unilever's policy of hiring local people, but it can also result in more misunderstandings and conflicts with the local employees and with the host country's government.
164
Some U.S. corporations take advantage of immigrants and their children to staff key positions when negotiating entry into another country and when selecting an executive to manage the company's new foreign operations.
For example, when General Motors wanted to learn more about business opportunities in China, it turned to Shirley Young, a Vice-President of Marketing at GM. Born in Shanghai and fluent in Chinese language and customs, Young was instrumental in helping GM negotiate a $1 billion joint venture with Shanghai Automotive to build a Buick plant in China. With other Chinese Americans, Young formed a committee to advise GM on relations with China. Although just a part of a larger team of CM employees working on the joint venture. Young coached GM employees on Chinese customs and traditions.
165
International Considerations in Leading
When 1 successful company in 1 country merges with another successful company in another country, the clash of corporate cultures is compounded by the clash of national cultures. With the value of cross-border mergers and acquisitions totaling $720 billion in 1999, the management of cultures is becoming a key issue in strategy implementation. Multinational corporations must pay attention to the many differences in cultural dimensions around the world and adjust their management practices accordingly. Cultural differences can easily go unrecognized by a headquarters staff that may interpret these differences as personality defects, whether the people in the subsidiaries are locals or expatriates.
166
Managing Internationnally Hofstede five cultural dimensions
167
In a study of 53 different national cultures, Hofstede found that each nation's unique culture could be identified using 5 dimensions. He found that national culture is so influential that it tends to overwhelm even a strong corporate culture. In measuring the differences among these dimensions of national culture from country to country, he was able to explain why a certain management practice might be successful in 1 nation, but fail in another.
Hofstedes five cultural dimensions are Power distance Uncertainty avoidance Individualism Collectivism Masculinity Feminity Time orientation
Source:168 Strategic Management ESCbusiness policy. T. Wheelen; Doing business in Europe G. Suder and Bretagne Brest - Globalization and Corporate Strategies
1. Power distance (PD) is the extent to which a society accepts an unequal distribution of power in organizations. Malaysia and Mexico scored highest, whereas Germany and Austria scored lowest. People in those countries scoring high on this dimension tend to prefer autocratic to more participative managers.
In large power-distance cultures, such as in Belgium, France, Poland and Portugal, everybody has his or her place in a hierarchy. In the UK, Germany, the Netherlands and Scandinavia, this idea of hierarchy is less important and more transparent. These countries are said to be in cultures of small power distance. Hierarchies are rather flat and the focus on collaboration of different power levels is higher. Management decisions, HR policies and business-government relations are influenced by the power-distance culture.
Source:169 Strategic Management ESCbusiness policy. T. Wheelen; Doing business in Europe G. Suder and Bretagne Brest - Globalization and Corporate Strategies
2. Uncertainty avoidance (UA) is the extent to which a society feels threatened by uncertain and ambiguous situations. In cultures of strong uncertainty avoidance, rules and formality provide for a feeling of structure and security. In weak uncertainty avoidance cultures people tend to be more innovative and entrepreneurial, in other words more risk-taking.
Greece and Japan scored highest on disliking ambiguity, whereas the United States and Singapore scored lowest. People in those nations scoring high on this dimension tend to want career stability, formal rules, and clear-cut measures of performance. The countries of south and east Europe score high on uncertainty avoidance, England and Scandinavia lower.
Source: Strategic Management and business policy. T. Wheelen; Doing business in Europe G. Suder
170
3. Individualism-collectivism (I-C) is the extent to which a society values individual freedom and independence of action compared with a tight social framework and loyalty to the group. In individualist cultures people emphasize their own concerns, even those of their own family, and want to differentiate themselves from others. In collectivist cultures people belong to in-groups, which support them in exchange for loyalty, and are preoccupied with a common goal rather than an individual one. In collectivist cultures the need for harmony may translate into higher degrees of conformity and acceptance of challenges.
The United States and Canada scored highest on individualism, whereas Mexico and Guatemala scored lowest. People in those nations scoring high on individualism tend to value individual success through competition, whereas people scoring low on individualism (thus high on collectivism) tend to value group success through collective cooperation. Northern Europeans are typically considered as tending towards individualism, and the south of Europe as rather collectivist.
171
Source: Strategic Management and business policy. T. Wheelen; Doing business in Europe G. Suder ESC Bretagne Brest - Globalization and Corporate Strategies
4. Masculinity-femininity (M-F) is the extent to which society is oriented toward money and things (which Hofstede labels masculine) or toward people (which Hofstede labels feminine). In masculine cultures, the dominant values are achievement and success. The dominant values in feminine cultures include care of others and quality of life, the focus on performance and achievement is less important while key for pride in masculine cultures. In addition, status is not interpreted equally in the two approaches.
Japan and Mexico scored highest on masculinity, whereas France and Sweden scored lowest (thus highest on femininity). People in those nations scoring high on masculinity tend to value clearly defined sex roles where men dominate and to emphasize performance and independence, whereas people scoring low on masculinity (and thus high on femininity) tend to value equality of the sexes where power is shared and to emphasize the quality of life and interdependence. In Europe, a tendency towards masculinity can be found in the cultures of the UK and Italy. Example of feminine cultures are the Netherlands, and the Scandinavian countries. Depending on the origin of your company, the origin of its executives or that of the majority of its employees, the Europeanized enterprise will tend to satisfy more than one or the other culture.
172
5. Long-term orientation (LT) is the extent to witch society is oriented toward the long versus the short term. . A long-term time orientation emphasizes the importance of hard work, education, and persistence as well as the importance of thrift. Nations with a longterm time orientation should value strategic planning and other management techniques with a long-term payback. Hong Kong and Japan scored highest on long-term orientation, whereas Pakistan scored the lowest
173

5-dimensions Hofstede model
100
90 80 70 60 50 40 30 20 10 0 Power Distance Individualism Masculinity Uncertainty Avoidance Long term orientation
Canada
China
France
Germany
Great Britain
Italy
Japan
Spain
U.S.A.
174
The European cultures have increased its peoples common economic, societal and even political links; this provides a feeling of belonging to a shared cultural space that underlies social, economic and political cohesion and hence a prosperous breeding ground for trans-nationality of business. The feelings that define this cohesion, that is, the identity of the European people, is based on the identification of what is shared (us) and what is different (the other). Only this in- and out-group identification (subconsciously often more than consciously) enables the construction of a true European identity.
Source: Doing business in Europe G. Suder
175
When conducting strategic planning in a multinational corporation, top management must be aware that the process will vary based upon the national culture where a subsidiary is located. For example, in 1 MNC, the French expect concepts and key questions and answers. North American managers provide heavy financial analysis. Germans give precise dates and financial analysis. Information is usually late from Spanish and Moroccan operations and quotas are typically inflated. It is up to management to adapt to the differences. Hofstede and Bond conclude: "Whether they like it or not, the headquarters of multinationals are in the business of multicultural management."
Source: Doing business in Europe G. Suder
176
IV.Conclusion
The Internationalization process
177
Trying a definition
Effort to increase the size of ones market through the conquest of foreign markets.


Take into account the legal, linguistic and other differences Organization of an export department, of a foreign representative or franchised distributor Organization of the international Supply Chain
178
Growth
The various methods for corporate expansion 1. Gaining market share through existing channels with existing products on current segment

Advertising effort Hard selling effort Promotional effort
2.
Gaining market share through

New products New segments of customers New channels
3.
Gaining new geographical markets (on another region or country) with

Existing products - adapted Existing segments - reinterpreted Existing channels or new channels importers, distributors, wholesalers, etc.
179
Some points in form of conclusion
The internationalization process is most frequently materialized in small and medium-size firms as the effort to start exporting.
Progressively the firm will build up a structured approach to foreign markets as a prominent way to grow and expand its accessible markets. The firm will first offer its existing products and will soon be confronted with specific expectations from the new consumers. It will progressively adapt its offer and develop a specific marketing package to satisfy foreign markets
Along this process it will meet the necessity of adapting its organization
180
Conclusion: business as usual but
Entering the internationalization process is getting new customers,
assessing their specific needs, adapting our offer, presenting it

through a proper marketing mix.
It means mastering specific risks
It means ensuring the return on investment
But
It means adapting the corporate organization through a specific process along a variable timeline
181
The next steps to globalization
182
Multi-nationalization
183
The multi-nationalization
Brain storming
We have seen what is the Internationalization process for firms: What could be the multi-nationalization process? In which way is it different from the Internationalization?
184
Multi-nationalization: becoming Trans National
Trying a definition
In a simple way, although not without ambiguity, one may

consider as multinational any enterprise having at least one production unit abroad; this unit will then be its subsidiary.
The logic of production is prevailing. A company may have local commercial representatives abroad,
but it will really become multinational only if it produces all or part

of its products outside its national boundaries (origin).
Source: Jean-Louis Mucchielli (Points conomie)
185
In a next phase the company become multinational: it means that it starts producing in a foreign market, would that be to feed to said market with its products or to take chance of better production factors to sell the products elsewhere, including in the home market. In this phase the acquisition of knowledge and experience about the foreign country is much deeper than in the internationalization phase. At the same time the company will transfer a broader knowledge to the production country. The supply chain will become even more complex and the company will tend to become organized by product line or by country of operations.
186
At the multi-national stage, the company may grow very big and operate production, logistic and selling activities in many countries. However such a company will not be organized to be virtually present on every geographical market.
Example of very large multinational company Renault
Large company producing in many countries and selling a broad range of products under three brands (Renault, Dacia and Samsung).
187
Multinational = Direct Investment
Definition
The economic characteristics allowing to establish that a capital flow is a direct investment, are the following:
1) a notion of control or ability to influence the management of a foreign enterprise, 2) a transfer of complex competencies (a technological unit), and
3) a logic of production
188
How to take benefit of foreign market
Avantages comptitifs Entres sur le march tranger
National production and export
Production in the receiving country
Licence or management contract
International Investment Tans National
Companies
Controlling share or total control
Joint-Venture partenership
Merger & Acquisition
Creation of a greenfield subsidiary
189
Types of establishment abroad

Limited intervention
(Subsidiary)
Sales subsidiary Production subsidiary Production of components Assembly Laboratory R&D Headquar ters
Partnership Joint-venture for commercialization (Joint-venture)
Joint-venture for production
Alliance
Delegated to others
Foreign Agent
OEM Sub-contractor
Franchising License agreement Purchase of patent
Commercialization
Production
Conception
Administration
Stage of the product located on the foreign marke

Source JL Mucchieli
190
TNC (Trans National Companies)
= A new organization
Consequences on the organization
The multi-nationalization of the firm is part of a dynamic including several stages, generating themselves an increased intensity of multinationalization. This progression may be observed through the evolution of the national and international organization of the firm. The enterprise is a complex structure, multi-functional and multiproducts. Along the multi-nationalization process, it is this complex structure that evolve and distort itself. Keeping or acquiring these competitive advantages will come as well from the performances of these activities as from the liaisons (coordination and optimization) among those activities.
191
The reasons for multi-nationalization
The firms aims at gaining market shares at the expense of its competitors:
1. 2. 3.
Cover the local demand (gain market potential) Better adapt its product to the local demand Reduce its costs by producing locally and then avoiding the transportation costs Find cheaper production cost through cheaper labor (for local production or parts and sub-components to be used in homeland production) Eliminate or reduce exchange risks Try to increase barriers to entry by attempting to better controlling the market from inside Turn around the import restrictions and quotas Cover the domestic market demand from a cheaper production base outside
4.
5. 6.
7. 8.
192
Mondialisation
193
Mondialisation
Trying a definition

Make the world the market of the firm

Give oneself the vocation to exploit the firm knowhow to all the potential clients in the world
Operate at the level of the world
Concentrate on Triadians
Create a multi-national culture Adapt its offer to the expectations of consumers in the various countries of the world
Develop its infrastructure and its supply chain at the level of the whole world
Move above than the stage of the export department

Complex organizational structures
194
At some point the company is organized to sell its products virtually everywhere in the world. In this phase the company is usually a multinational structure, although it is not always the case: some companies have only one production site in their country of origin and sell to all countries in the world. The company considers that for its products the world is its potential market. It will be organized by direct subsidiaries or any kind of partnership to distribute its products and service them in every country (even if it may select only those countries where there is a significant market for its products, it could extend sales to any new country where a demand would appear). Such company can be named Mondiale or world company.
195
The Triad
The existence of a worldwide market and the rapid diffusion of technology are as many elements, on the side of demand as well as on the side of the offer, which drive large multi-national firms to become global, that is to say, to have a strategy simultaneously on the three main
markets composing the triad (Northern America,

Europe, Japan).
196
Globalization
197
Globalization
Trying a definition
Make the most of our specific competencies, fully, close to all possible clients.

Homogeneous geographic coverage Covering most or all of the market segments or, Creation of the World Product, common the all the planet
Deep valorization of the market: creation of value for the client, sales of services and products
Mobilization of the full scope of corporate resource on its core business (mtier).
Major increase of the cost of research, development and introduction on the marketplace.
Maximum concentration of available resources. Give up non essential activities
Visible strategy for the stock exchange operators
Oligopoly situation
198
The last stage of the internationalization process is the one of the global company.

Global companies operate in global industries. The main characteristic of a global company is that it does not only sell its products to all countries of the world: it tends to cover in every market all the segments accessible through its expertise, technology or production base. It focuses on one industry but tends to make full use of its competencies in that industry to offer broad and deep product lines likely to cover all the market segments.
Examples are: The car industry or the tire industry
199
Global marketing
Ted Levitt (quoted by Kotler & Dubois) The differences related to culture, national standards, to the business structure are remains of the past the powerful flow of the technology drives the world to a converging community. Only the global companies are promised to long term success by focusing on what everybody wants, rather than on the details of what the people think they want A global competitor will always try and standardize its offer everywhere; he will depart from standardization only after exhausting every possibility to preserve it, and he will tend to come back to standardization as soon as discrepancies would be reduced. He will never suppose that the consumer knows his own desires. The global competition rings the bell of the local dominations.
200
Global Industry
A global industry is an industry in which the strategic positions of the competitors are determined in relation with worldwide stakes
A global firm will thus try to capitalize on opportunities for research, production, logistics, and marketing at the scale of the planet
(Kotler & Dubois 10me dition)
201
Types of competition
P ure com petition Num ber of econom ic actors P roduct
unlim ited
Monopolistic com petition

num erous
Oligopoly
Few
Monopoly
Single
Hom ogeneous, undifferentiated Lim ited
D ifferentiated, num erous, very sim ilar substitutes Few lim itations
D ifferentiated or undifferentiated Many
Few substitute or none Absence of com petition Nil
Lim itation to com petition Im portance of the price com petition Im portance of advertising Exam ples
Nil
Very strong
Com petition by price is avoided Very strong
Nil
Rather strong
Nil
Som e agricultural products
Watches, toothpaste, coffee
Cars, Airlines, car rental
P ublic service com panies
202
The impact on the organization

Elements of difference between the strategies of globalization and those of glocalization
Global Strategy International allocation of functions - tasks Quest for economies of scale on world basis Importance of logistic coordination Production for a unified world market Strategy of glocalization Regional division of functions tasks Quest for economies of scale on a regional basis Regional concentration of the production to limit logistic costs Production adapted to one market
Source: M. Daynac, C. Dupuy, Y. Pandero: L importance du facteur rgional dans les stratgies de global/localisation des groupes japonais implants en Europe Cit par JL Mucchielli, Multinationales et mondialisation
203
Geographic dimension: entering new markets Product portfolio P r o d u c t

Product line 1 Product line 2 Product line 3 Product line 4 Product line 5
Domestic market
Product line 1 Product line 2 Product line 3 Product line 4
Market 2
Product line 1 Product line 2
Market 3
Product line 1
Market 4
Market 5
Product line 1
Market 6
Market 7
Product line 1
Product line 3 Product line 4 Product line 5 Product line 5 Product line 4
Product line 4 Product line 5 Product line 5
Product line 4
204
The main characteristics of global companies are: Global companies are taking chance and have accelerated the international fragmentation of the value chain The value chain of the industries and global companies is more and more fragmented.
They take benefit of the Ricardo theory (Theory of the comparative advantages published in 1817) according to which each country is interested in specializing in the production of goods and services for which it is most efficient. By doing so, every country will benefit of the free-exchange as the total value chain would optimized
Raw materials, parts and components are supplied from the cheapest/most efficient source, almost disregarding the distance and transportation costs, in order to be finally assembled at the best possible cost/performance ratio
205
The main characteristics of global companies are: Global companies produce and sell in many locations a wide range of products. Decisions for geo-localization of production/sales are made to optimize the total costs of the factors, instead of sub-optimizing them. They will combine independently, without much consideration for their home country or any specific interest than profit and efficiency maximization, the localization of the production of the various parts and sub-components, the final assembly, the logistic flow through a worldwide supply chain.
For example they may accept to pay higher transportation cost of duty rates if it can be counterbalanced by lower manpower cost or stable raw material supply.
206
Global companies manage very complex organizational structures, combining geographical region and product line management. They are frequently organized around a matrix strategy with Business Units specialized by regions of the world and having their complete facilities in terms of RD, production and marketing, while sharing key resources with the other units. They manage very complex supply chains worldwide, sourcing raw materials, parts component or products that they will assemble, combine and distribute worldwide as well. The coordination of such complex structures and system is frequently what is generating a competitive edge or to the opposite a major handicap for the global company.
207
Global companies will always operate in a quest for maximum standardization of the processes (management, production, design, etc.) and products in order to best levy on their size to reduce costs. However they will be permanently looking after the best possible compromise, depending on their industry and specific market, between producing (1) a world product (same for all markets), (2) mass-customized products, produce in large volumes but adapted to each country and/or segment specific requirements or (3) individualized products specially crafted on order for each individual customer (tailor-made luxury suit, luxury cars, etc.).
208
The World Product

Standardized, Common Mass produced Ex. I phone / I Pad
The mass-customized Product

What is invisible is standardized and mass produced What is visible is adapted Ex. Automobile
The Individualized Product

Methods and competencies are shared The production tools are common The product is tailor-made for each customer Ex. BMW, a trade show?
209
Depending on the industry under consideration and the nature of the product offered, the global company will move the cursor between the world product (one product for all: ex. IPhone), the masscustomized product (mass production of a product largely adapted to each market segment: ex. Watches), and the individualized product, tailored especially for one named consumer, produced on order (luxury garment, luxury cars). Modern production facilities allow this tailoring of the product while retaining reasonable economies of scale. Global companies should be able to exploit local innovations whereas they are generated internally in the organization or traced outside and acquired.
210
Global companies take benefit from their proximity with each individual market provided by their extensive organizations and physical presence in all key markets Ex. Toyota having design centers in California, France, Japan, etc.
They tend to cover with their offer the maximum possible number of segments reachable with their resources and technology. This leads them to manage many several or brands to clearly identify each product line for the consumers of each identified segment.
They usually control a significant market share worldwide and will tend to homogenize their share in the various main consumption areas. They have usually been striving in the recent years to capture market share in emerging markets, out of the low growth Triad countries.
211
They are always looking for the best possible balance between centralized management, leading to homogeneity and consistent strategies across the board, and decentralized management, allowing faster reaction and adaptation to local needs. A frequent approach is so-called glocalization: trying to make central everything possible while leaving local what is necessary for efficiency and satisfaction of local conditions and market requirements. They manage their human resources in an optimized way across cultures and background. They raise talents disregarding their country of origin and pool resources in all their facilities. They are able to recruit and retain the best talents, irrespective to their origin and background They able to manage efficiently multi-cultural work teams
212
Cost saving is achieved in several ways: Global companies suffer from high structural and coordination costs that must be compensated by the following ways

Sales to all markets in the world, expansion of customer base, increased volume as well as maximum standardization will provide economies of scale Take full benefit from fragmented value chain Externalization of production whenever relevant Invisible parts and components are made common to several product lines and to all markets (car platform). They will deliver economies of range (or scope) Production systems are made flexible: machinery, production flow optimization, lean production systems, etc. Production facilities specialized by product rather than by market (generating more transportation but optimizing the product costs)
Fast progress on the learning curve thanks to their massive expenditures in process and tooling development.
Cheaper funding thanks to their size, ability to borrow money in many countries (or be listed on several stock exchange markets)
213
Critical Mass effect Economies of scale
Spreading fixed costs related to

assets, research,
Creation and development of brands
On a larger volume of products sold
Economies of range Spreading of the cost for developing the production process and related equipment used for the various products of the range (ex. Car platform concept)
Learning curve
Capitalization on their knowledge and experience

214
Concept
Internationalisation Multinationalisation
Mondialisation
Globalisation
Exporting from home country Producing in one foreign country Organized to sell into any country of the world Cover all accessible market segments Stage of the export department Adapting the offer 215
Acquiring and delivering expertise
Global multi-cultural approach
Conclusion and Summary
216
Globalization: causes and consequences

Globalization
A.
Six main causes to the globalization of the world 1. The development of the means of transportation and communication 2. Increase of the cost of research, development, industrialization and marketing 3. The changes in the offer 4. The changes in the demand 5. The exhaustion (or the absence) of natural resources 6. The liberalization of financial flows Four main consequences of the globalization 1. The development of World trade 2. Cross border investments 3. Migration flows 4. Increased competition at every level Reinforced by the global crisis of September 2008 But the worst is not certain
B.
217
ESC BretagneGlobalization and Corporate Strategies Brest - Globalization and Corporate Strategies
Closing the gap
218
Globalization and Corporate Strategies
Reduce absolute poverty and/or Reduce inequalities?

There is no longer a debate about the fact that Globalization has contributed in reducing massively the absolute poverty and raising the living conditions of billions of people above the poverty line (1,25 USD/day). There is debate about the reduction of inequalities: the globalization seems to be a factor increasing the gap between the top 10th richest and bottom 10th poorest people. The key challenge for the future is how to improve the condition of the bottom (lost?) billion people.
219
ESC Bretagne Globalization and Corporate Strategies Brest - Globalization and Corporate Strategies
Globalization: how do the firms have to react

A.
I.
The value chain and corporate strategies

Basic organizational and marketing concept to prepare the internationalize approach
B.
I.
The internationalization process: the steps to export

The strategic steps
1) 2) 3) 4)
Diagnostic Methodology for the study Marketing Plan Deployment
II.
The techniques of International Trade

1)
Supporting organisms
2)
3) 4)
Specificities
Prospection Risks and Solutions
III. IV.
The impact of Internationalization on corporate offer, operations and organizations Conclusion: business as usual, but
C.
I. II. III.
The next steps to Globalization

Multi-nationalization Mondialisation Globalization
D.
A continuous process - Different stages for companies according to their size and global market share
220
Concept
There is a progressive development cycle for the firms
Multi-nationalization Mondialisation
Globalization
The Trans National Companies (TNC) operate further downstream than Small and Medium Size Companies, which generally remain at the level of Internationalization (according to their size and relative market share)
221
Trying a definition
Effort to increase the size of ones market through the conquest of foreign markets.



Take into account the legal, linguistic and other differences
Organization of an export department, of a foreign representative or franchised distributor

Organization of the international Supply Chain
222
In essence, the export activity is the continuation of the domestic activity
It remains a matter of preparing a competitive offer to new potential customers and generate the demand through proper marketing mix It is the continuation of a growth process that is vital for any enterprise
However it raises many new challenges

The customers are new and do not share the same culture, creeds and needs
The partners are new

The environment (legal, economic, social, regulatory, practices, etc.) is new The competitors are new The distribution channels might be different
The purchasing pattern and customers expectations might be different

The using conditions for the product could be different, more severe Etc.
The challenge is the unknown
Risks vs. Control
223
The need for Growth compels international development

The various methods for corporate expansion 1. Gaining market share through existing channels with existing products on current segment
Advertising effort Hard selling effort Promotional effort
2.
Gaining market share through

New products New segments of customers New channels
3.
Gaining new geographical markets (on another region or country) with

Existing products - adapted Existing segments - reinterpreted Existing channels or new channels importers, distributors, wholesalers, etc.
224
The steps to internationalization

Selection and study of the market Elaboration of the marketing plan Specific line of products Pricing and payment policy Distribution policy Advertising Communication Staffing Commercial action
Selection and set up of the exclusive importer
Rupture of the contract and set up of regional distributors (agents)
Organization of a network of distribution direct
Direct deliveries
Organization of the local logistic
Creation of the local representation office
Creation of the commercial subsidiary
Local sub-contracting
Industrial installation
Period of the export department
Period of the international matrix structure
225

1.
Executive summary A high-level summary of the marketing plan The challenge Brief description of product to be marketed and associated goals, such as sales figures and strategic goals Situation analysis Company analysis
Goals Focus Culture Strengths Weaknesses Market Share
2.
3.
Customer analysis
Number Type Value drivers Decision process Concentration of customer base for particular products
226
3.
Situation analysis Competitor analysis

Market position
Strengths Weaknesses Market share
See Competition analysis
Collaborators - Partners
Subsidiaries Joint ventures Distributors Etc.
Climate
PEST analysis Political and legal environment Economic environment Social and cultural environment Technological environment
227

3.
Situation analysis SWOT analysis: a SWOT analysis of the business environment can be performed by organizing the environmental factors as follows: The firms internal attributes can be classed as strengths and weaknesses The external environment presents opportunities and threats
Market segmentation Segment 1
Description Percent of sales
4.
Tracing our Strengths
Tracing our Weaknesses Minimizing our Weaknesses or Gaining Competencies to take benefit from Opportunities
What they want

How they use the product Support requirements How to reach them Acceptable price bracket Price sensitivity
Tracing our Opportunities
Make use our of Strengths to take benefit from Opportunities
Segment 2
Tracing our Treaths
Make use of our Strengths to reduce the Threats
Minimizing our Weaknesses and reduce Treaths by taking a different course
228
5.
Selected marketing strategy Discuss why the strategy was selected Present the marketing mix decisions (4 Ps) Product: The product decisions should consider the products advantages and how they will be leveraged. Product decisions should include
Brand name Quality Scope of the product line Warranty Packaging
Price: Discuss pricing strategy, expected volumes and decisions for the following pricing variables
Brand A
115 100 90 80 70 60 50 40 55 45 45 80 70 100 90 85
Brand B
115
Brand C
Brand D
List price Discounts Bundling Payment terms and financing options Leasing options
105
105 90
65 60
40
229
5.
Selected marketing strategy (continued) Distribution (Place): decision variable include

Distribution channels, such as direct, retail, distributors & intermediaries Motivating the channel Ex. Distributor margins Criteria for evaluating distributors Logistics, including transportation, warehousing and order fulfillment
Promotion
Advertising, including how much and which media Public relations Promotional programs Budget. Determine break-even point for any additional spending Projected results of the promotional program
6.
7.
Short & Long-term projections The selected strategys immediate effects, expected long-term results and any special actions required to achieve them. This section may include forecasts of revenues and expenses as well as the results of a break-even analysis Prepare the provisional Profit & Loss Account and determine the return on investment Conclusion
230
The Business Plan is translated into numbers that will allow to drive the deployment phase
Business Plan - Sales composition Business Plan - Organization
Business Plan
Year 1 - 1H Year 1 - 2H 14 300 000
Year 1 - Total 26 000 000 78 000 0,30%
Year 2 - 1H 11 934 000
Year 2 - 2H 14 586 000
Year 2 - Total 26 520 000 2% 159 120 0,60%
Year 3 - 1 H 12 292 020
Year 3 - 2H 15 023 580
Year 3 - Total 27 315 600 3% 273 156 1,00%
Market demand Growth Target Units Market Share Average unit Price List Discount Net
11 700 000
29 250 0,25% 200 25% 150 4 387 500 3 071 250
48 750 0,34% 200 25% 150 7 312 500 5 118 750 70% 2 193 750 30,0%
47 736 0,40% 206 25% 154,5
111 384 0,76% 206 25% 154,5 17 208 828 12 476 400 72,50% 4 732 428 27,5%
92 190 0,75% 212 30% 148,5
180 966 1,20% 212 30% 148,5 26 878 134 20 158 600 75% 6 719 533 25,0%
Business Plan
Year 1 - 1H Year 1 - 2H
Year 1 - Total
Year 2 - 1H
Year 2 - 2H
Year 2 - Total Year 3 - 1 H
Year 3 - 2H
Year 3 - Total
Headcount Managing Director

40 570 768 30 428 076 10 142 692 25,0%
1 4 60 1 2 120 0
1 4 60 1 2 150 0
Net Sales Cost of Goods sold COGS % Margin Margin %
11 700 000 8 190 000 3 510 000 30,0%
7 375 212 5 347 029 72,50% 2 028 183 27,5%
24 584 040 17 823 429 6 760 611 27,5%
13 692 634 10 269 476 75% 3 423 159 25,0%
Sales manager Salesmen Outlets / Head Finance & Admin. Order Desk Outlets / Head Human Resource Total Headcount Average cost / Head included) (all Total Payroll
70% 1 316 250 30,0%
1 1 4 70 2 1 150 1
1 1 5 70 2 2 150 1
1 1 5 80 3 2 160 1
1 1 5 80 3 3 160 2
Customer outlets Potential In-House-Share Sales / Outlet Number of outlets
2500 5% 125 234
2500 8% 200 244 239
3000 10% 300 159
3000 10% 300 371 265
3500 12,5% 437,5 211
3500 12,5% 437,5 414 312
8 8 30 000 30 000 1 413 000 1 383 750
10 13 27 500 27 500 2 796 750 1 670 345 2 108 568
14 15 25 000 25 000 3 778 913 2 066 880 2 213 352
4 280 232
IDRAC - Globalization and Corporate Strategies
Business Plan - Costs

Business Plan
Year 1 - 1H Year 1 - 2H 7 312 500 5 118 750 70% 2 193 750 30,0% 1 383 750 100 000 1 237 656 3,25% 182 250 54 675 15 000 731 250 1 000 2 500 2 000 2 500 2 500 2 500 2 479 925 -286 175
Year 1 - Total Year 2 - 1H 11 700 000 8 190 000 3 510 000 30,0% 2 796 750 200 000 380 250 358 650 107 595 30 000 1 170 000 2 000 5 000 4 000 5 000 5 000 5 000 4 688 995 -1 178 995
7 375 212 5 347 029 72,50% 2 028 183 27,5% 1 670 345 100 000 1 239 694 3,25% 218 250 68 203 15 000 663 769 2 000 3 500 3 500 3 500 3 500 3 500 2 755 067 -726 883
Year 2 - 2H 17 208 828 12 476 400 72,50% 4 732 428 27,5% 2 108 568 200 000 2 430 221 2,50% 262 944 82 170 15 000 1 548 795 2 000 3 500 3 500 3 500 3 500 3 500 4 236 977 495 451
Year 2 - Total 24 584 040 17 823 429 6 760 611 27,5% 3 778 913 300 000 669 915 481 194 150 373 30 000 2 212 564 4 000 7 000 7 000 7 000 7 000 7 000 6 992 043 -231 432
Year 3 - 1 H 13 692 634 10 269 476 75% 3 423 159 25,0% 2 066 880 200 000 2 342 316 2,50% 262 944 85 457 22 500 1 095 411 3 000 4 500 5 000 4 500 4 500 4 500 3 759 192 -336 033
Year 3 - 2H 26 878 134 20 158 600 75% 6 719 533 25,0% 2 213 352 300 000 3 470 367 1,75% 258 136 83 894 22 500 2 150 251 3 000 4 500 5 000 4 500 4 500 4 500 5 054 133 1 665 400
Year 3 - Total 40 570 768 30 428 076 10 142 692 25,0% 4 280 232 500 000 812 683 521 080 169 351 45 000 3 245 661 6 000 9 000 10 000 9 000 9 000 9 000 8 813 325 1 329 367
Net Sales
4 387 500 3 071 250
Business Plan
Year 1 - 1H Year 1 - 2H 100 000 1 237 656 3,25% 182 250 5 6000 54 675 120 15 15 000 731 250 5% 5% 1 000 2 500 2 000 2 500 2 500 2 500 2 479 925
Cost of Goods sold

Year 1 - Total 200 000 380 250 358 650
Year 2 - 1H 100 000 1 239 694 3,25% 218 250 6 6000 Year 2 - 2H 200 000 2 430 221 2,50% 262 944 7 6000 82 170 125 15 15 000 1 548 795 4% 5% 2 000 3 500 3 500 3 500 3 500 3 500 4 236 977
Year 2 - Total 300 000 669 915 481 194
Year 3 - 1 H 200 000 2 342 316 2,50% 262 944 7 6000
Year 3 - 2H 300 000 3 470 367 1,75% 258 136 7 6000 83 894 130 15 22 500 2 150 251 3% 5% 3 000 4 500 5 000 4 500 4 500 4 500 5 054 133
Year 3 - Total 500 000 812 683 521 080
COGS % Margin Margin % Total Payroll Logistics Warehousing # Warehouses Delivery cost Cost / NS%
70% 1 316 250 30,0% 1 413 000 100 000 1 142 594 3,25% 176 400 52 920 15 000 438 750 1 000 2 500 2 000 2 500 2 500 2 500 2 209 070 -892 820
Logistics
Warehousing # Warehouses Delivery cost Cost / NS% # Vehicles Cost / vehicle
100 000 1 142 594 3,25% 176 400 5 6000 52 920
Automotive
Travel Cost per day # days / head / month Rent Sales Promotion & Advertising Advertising / NS % Promotion / NS % Office Supplies Communication Depreciation Legal & Tax Outside services Other expenses Total Opex
107 595
68 203 125 15
150 373
85 457 130 15
169 351
120 15 15 000 438 750 5% 5% 1 000 2 500 2 000 2 500 2 500 2 500 2 209 070
Automotive Travel
45 000 3 245 661
30 000 1 170 000
15 000 663 769 4% 5%
30 000 2 212 564
22 500 1 095 411 3% 5%
Rent Sales Promotion & Advertising
2 000 5 000 4 000 5 000 5 000 5 000 4 688 995
2 000 3 500 3 500 3 500 3 500 3 500 2 755 067
4 000 7 000 7 000 7 000 7 000 7 000 6 992 043
3 000 4 500 5 000 4 500 4 500 4 500 3 759 192
6 000 9 000 10 000 9 000 9 000 9 000 8 813 325
Office Supplies Communication Depreciation Legal & Tax Outside services Other expenses Total Opex NPBT
231
Multi-nationalization: becoming Trans National
Trying a definition
In a simple way, although not without ambiguity, one may consider
as multinational any enterprise having at least one production unit abroad; this unit will then be its subsidiary. The logic of production is prevailing. A company may have local commercial representatives abroad, but it
will really become multinational only if it produces all or part of its

products outside its national boundaries (origin).
Source: Jean-Louis Mucchielli (Points conomie)
232
TNC (Trans National Companies) Consequences on the organization
= A new organization
The multi-nationalization of the firm is part of a dynamic including several stages, generating themselves an increased intensity of multi-nationalization. This progression may be observed through the evolution of the national and international organization of the firm.
The enterprise is a complex structure, multi-functional and multiproducts. Along the multi-nationalization process, it is this complex structure that evolve and distort itself. Keeping or acquiring these competitive advantages will come as well from the performances of these activities as from the liaisons (coordination and optimization) among those activities.
233
The reasons for multi-nationalization
The firms aims at gaining market shares at the expense of its competitors:
1. 2. 3.
Cover the local demand (gain market potential) Better adapt its product to the local demand Reduce its costs by producing locally and then avoiding the transportation costs Find cheaper production cost through cheaper labor (for local production or parts and sub-components to be used in homeland production) Eliminate or reduce exchange risks Try to increase barriers to entry by attempting to better controlling the market from inside Turn around the import restrictions and quotas
4.
5. 6.
7.
234
Mondialisation
Trying a definition
Make the world the market of the firm Give oneself the vocation to exploit the firm knowhow to all the potential clients in the world
Operate at the level of the world
Concentrate on Triadians
Create a multi-national culture
Adapt its offer to the expectations of consumers in the various countries of the world Develop its infrastructure and its supply chain at the level of the whole world
Move above than the stage of the export department Complex organizational structures
235
The Triad
The existence of a worldwide market and the rapid diffusion of technology are as many elements, on the side of demand as well as on the side of the offer, which drive large multi-national firms to become global, that is to say, to have a strategy simultaneously on the three main
markets composing the triad (Northern America,

Europe, Japan).
Ohmae
236
Globalization Trying a definition

Make the most of our specific competencies, fully, close to all possible clients.
Homogeneous geographic coverage Covering most or all of the market segments or, Creation of the World Product, common the all the planet Deep valorization of the market: creation of value for the client, sales of services and products
Mobilization of the full scope of corporate resource on its core business (mtier).
Major increase of the cost of research, development and introduction on the marketplace. Maximum concentration of available resources. Give up non essential activities Visible strategy for the stock exchange operators
Oligopoly situation
237
Global marketing
Ted Levitt (quoted by Kotler & Dubois) The differences related to culture, national standards, to the business structure are remains of the past the powerful flow of the technology drives
the world to a converging community. Only the global companies are

promised to long term success by focusing on what everybody wants, rather than on the details of what the people think they want A global competitor will always try and standardize its offer everywhere; he will depart from standardization only after exhausting every possibility to preserve it, and he will tend to come back to standardization as soon as discrepancies would be reduced. He will never suppose that the consumer knows his own desires. The global competition rings the bell of the local dominations.
238
Global Industry
A global industry is an industry in which the strategic positions of the competitors are determined in relation with worldwide stakes
A global firm will thus try to capitalize on opportunities for research, production, logistics, and marketing at the scale of the planet
(Kotler & Dubois 10me dition)
239
The main characteristics of global companies are: Global companies are taking chance and have accelerated the international fragmentation of the value chain The value chain of the industries and global companies is more and more fragmented.
They take benefit of the Ricardo (Theory of the comparative advantages published in 1817) theory according to which each country is interested in specializing in the production of goods and services for which it is most efficient. By doing so, every country will benefit of the free-exchange as the total value chain would optimized
Raw materials, parts and components are supplied from the cheapest/most efficient source, almost disregarding the distance and transportation costs, in order to be finally assembled at the best possible cost/performance ratio
240
The main characteristics of global companies are: Global companies produce and sell in many locations a wide range of products. Decisions for geo-localization of production/sales are made to optimize the total costs of the factors, instead of sub-optimizing them. They will combine independently, without much consideration for their home country or any specific interest than profit and efficiency maximization, the localization of the production of the various parts and sub-components, the final assembly, the logistic flow through a worldwide supply chain.
For example they may accept to pay higher transportation cost of duty rates if it can be counterbalanced by lower manpower cost or stable raw material supply.
241
Global companies manage very complex organizational structures, combining geographical region and product line management. They are frequently organized around a matrix strategy with Business Units specialized by regions of the world and having their complete facilities in terms of RD, production and marketing, while sharing key resources with the other units. They manage very complex supply chains worldwide, sourcing raw materials, parts component or products that they will assemble, combine and distribute worldwide as well. The coordination of such complex structures and system is frequently what is generating a competitive edge or to the opposite a major handicap for the global company.
242
Global companies will always operate in a quest for maximum standardization of the processes (management, production, design, etc.) and products in order to best levy on their size to reduce costs. However they will be permanently looking after the best possible compromise, depending on their industry and specific market, between producing (1) a world product (same for all markets), (2) mass-customized products, produce in large volumes but adapted to each country and/or segment specific requirements or (3) individualized products specially crafted on order for each individual customer (tailor-made luxury suit, luxury cars, etc.).
243
Global companies take benefit from their proximity with each individual market provided by their extensive organizations and physical presence in all key markets Ex. Toyota having design centers in California, France, Japan, etc.
They tend to cover with their offer the maximum possible number of segments reachable with their resources and technology. This leads them to manage many several or brands to clearly identify each product line for the consumers of each identified segment.
They usually control a significant market share worldwide and will tend to homogenize their share in the various main consumption areas. They have usually been striving in the recent years to capture market share in emerging markets, out of the low growth Triad countries.
244
They are always looking for the best possible balance between centralized management, leading to homogeneity and consistent strategies across the board, and decentralized management, allowing faster reaction and adaptation to local needs. A frequent approach is so-called glocalization: trying to make central everything possible while leaving local what is necessary for efficiency and satisfaction of local conditions and market requirements. They manage their human resources in an optimized way across cultures and background. They raise talents disregarding their country of origin and pool resources in all their facilities.
245
Cost saving is achieved in several ways: Global companies suffer from high structural and coordination costs that must be compensated by the following ways

Sales to all markets in the world, expansion of customer base, increased volume as well as maximum standardization will provide economies of scale Take full benefit from fragmented value chain Externalization of production whenever relevant Invisible parts and components are made common to several product lines and to all markets (car platform). They will deliver economies of range (or scope) Production systems are made flexible: machinery, production flow optimization, lean production systems, etc. Production facilities specialized by product rather than by market (generating more transportation but optimizing the product costs)
Fast progress on the learning curve thanks to their massive expenditures in process and tooling development.
Cheaper funding thanks to their size, ability to borrow money in many countries (or be listed on several stock exchange markets)
246
Concept
Trans-National Companies: They aim at producing close to their main markets (opened and developed in the previous stage of the cycle) and to diversify their procurement in a flexible way at the stage of Multi-Nationalization (subcontracting, licensing, franchising, partnership, joint venture, direct investment)
At the stage of Mondialisation, they proceed mainly by partial or total acquisition of a local competitor which allows them to save considerable time in the learning of the market and the development of local suitable means and infrastructure
At the stage of Globalization, they pool on their worldwide resources and competencies to cover the full scope of the market and make each individual customer their customer
247
Concept
Mondialisation
Globalisation
Learning of the market Adaptation to the market Modification of the local representation Direct local presence Gain control Reorganization of the company Global multi-cultural approach 248
Concept
Mondialisation
Globalisation
Exporting from home country Producing in one foreign country Organized to sell into any country of the world Cover all accessible market segments Stage of the export department Adapting the offer 249
Acquiring and delivering expertise
Global multi-cultural approach
Bibliographie
Rapports de lInstitut Montaigne:
Mondialisation: rconcilier la France avec la comptitivit Rendre lEurope comptitive Processus de Lisbonne : contribution du CES la prparation du sommet du printemps 2008 Commission pour la libration de la croissance franaise Evolution rcente du commerce extrieur franais Patrick Artus, Lionel Fontagn Mondialisation: les atouts de la France - Philippe Aghion, Patrick Artus, autres
Rapport du Conseil Economique et Social
Commission Attali
Rapports du Conseil dAnalyse Economique

Hubert Vdrine: Rapport sur la France et la mondialisation Rapport de la CIA: comment sera le monde en 2020? Patrick Artus: Banques centrales et Crises financires Nicole Gnesotto, Giovanni Grevi: Le monde en 2005 Jean-Louis Mucchielli: Multinationales et mondialisation. Points conomie Kotler & Dubois 10me dition Le Figaro Les Echos
250
Bibliographie

La mondialisation Emergences et Fragmentations: Pierre-Nol Giraud ; Ed. Sciences Humaines La mondialisation Gense, acteurs et enjeux : Laurent Carrou ; Ed. Bral Gopolitique du monde contemporain Etats, continents, puissances : Pierre Gentelle ; Ed. Nathan Strategor Politique gnrale de l'entreprise. Collectif des professeurs d'HEC Dpartement Stratgie et Politique d'entreprise HEC ; Ed. Dunod Globalisation Le pire est venir : Patrick Arthus / Marie-Paule Virard; La Dcouverte La mondialisation nest pas coupable Vertus et limites du libre-change : Paul Krugman; La Dcouverte Vainqueurs et vaincus Lendemains de crise Franois Heisbourg
La mondialisation Gnse, acteurs et enjeux: Laurent Carrou, Didier Collet, Claude Ruiz; ECS
Lordre mondial: Philippe Moreau Defarges; Armand Colin Gopolitique du monde contemporain; Nathan
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Author: Bruno Frachon Mail: teachandconsult@hotmail.fr Tel: 06 17 09 68 81
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Strategic Management

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Strategic Management

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Strategies for International Expansion

a different approach for Trans National Firms and SME

ESC Bretagne Brest - Globalization and Corporate Strategies

Objectives of the session

The characterisitics of global companies

Summary of the previous episode

ESC Bretagne Brest - Globalization and Corporate Strategies

Reasons for corporate management

ESC Bretagne Brest - Globalization and Corporate Strategies

Impact of globalization on Strategic Management

ESC Bretagne Brest - Globalization and Corporate Strategies

Corporate and business strategies

ESC Bretagne Brest - Globalization and Corporate Strategies