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A multicountry vs a global strategy

1421 words (6 pages) Essay in Marketing

5/12/16 Marketing Reference this

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Multicountry strategies differ significantly from global strategies in terms like brand presentation, mission achievement, positioning within market, company internal work patterns, etc.. Different countries contain differences in culture, rules and regulations.

2 Multi-country or global strategy?

2.1 … for personal computers

I consider personal computers to be midpriced high-tech devices. These high tech machines put requirements on their usage environment, these environmental constraints imply product adaptation for fitting, see Thompson/Strickland/Gamble (2010) page 209. In case of the PC however these differences can be treated as minimal variations, for example power plug cables, different keyboard in general.

For this case, I assume that we speak about a PC manufacturer that also sells its PCs, both desktop and laptop.

2.1.1 Back part of industry value chain

Producing personal computers requires dedicated assembly sites where PC source parts are shipped to. Shipping costs of supply parts like hard drives, RAM, power power supply unit, motherboard or casing should be minimal. An assembled and packed PC is in general smaller than the sum of packaging of the individual parts, but has the same constraints on careful handling while shipping. Therefore, it is cheaper to assemble a PC and then ship it to its target destination. Usually, there are a limited amount of manufacturing and assembly sites, for example (n.d.) says that Acer has “several locations throughout the world” and large distribution network in over 100 countries.

2.1.2 Forward part of industry value chain

Distribution of PCs has to happen through local distribution channels to increase reach, as buyers across countries have different buying patterns and preferences, as shown inThompson/Strickland/Gamble (2010) page 230 for Dell and China.

2.1.3 Discussion

A think-local approach, act-local, a true multi-country approach, won’t work for a big company as the assembly of PCs requires valuable knowledge and skills to achieve economies of scale in terms of resource prices (RAM, HD, etc), production site maintenance costs, etc. This cannot be replicated easily.

The think-global, act-global, the true global strategy, approach disqualifies itself due to the different consumption patterns across countries, however the best approach seems to be a strategy that unites similar market regions in sales regions like Europe or North America.

The think-global, act-local approach, a hybrid between multi-country and global, is the best choice for a PC manufacturer and reseller.

Benefitting from a few cost effictive production/assembly sites, possibly as close to part suppliers as possible to minimize transaction costs along the supply chain, it is possible to ship the almost-ready-made PCs to their target destinations quickly. In the target country, at the target destination, specialized sales activities should sell according to local habits and rules, maintaining as much of a global brand as possible. Last finishing activities have to fit the PC to the local market, for example adding special power cables or even relabeling and rebranding for a local market, as it could be that a brand name or a product name touches local aesthetics, as it is the case with english speakers for “Ma Poo Tofu” (seeDishADish (n.d.)).

2.2 … for washing machines

The washing machine market has to be distinguished into commercial and end-consumer washing machines. For this article, I concentrate on end-consumer washing machine industry only, examples of such washing machine producers are Miele, Whirlpool and Samsung, etc.

In industrial countries, the overall washing machine market can be considered as mature and as growing in emerging countries. In India, according to NaukriHub (n.d.), the washing machine market growth from 2006 to 2007 was “1.8 million units” to “2.2 million units”.

2.2.1 Back part of industry value chain

Washing machine production includes usage of several low-tech components. Economy of scale effects can be achieved by assembling in few production sites. Usually no high-tech products are required, mostly low-tech components like a drum, a casing, power supply unit, doors are used. A minimal amount of internationalization is needed for the instructions panel. All these parts require quickly learned expertise, which makes the washing machine producer relatively flexible and strong when it comes to processor-supplier negotiations.

2.2.2 Front part of industry value chain

Washing machines can be seen as commodity-like products in developed countries, they can be bought in almost every bigger retailer. The big retailers like Walmart, Metro, Carrefour, Tesco are very important resellers for washing machines. Washing machine vendors do, according to my best knowledge, not entertain their own washing machine centers. Washing machine and household centers sell several brands at once.

The biggest part of growth happens in emerging countries, a growing middle class can more and more finance a technical household revolution, seeThompson/Strickland/Gamble (2010) page 229.

2.2.3 Discussion

A think-local, act-local approach is not necessary, as the product “washing machine” does and is everywhere mostly the same. Some small variations in terms of power supply exist, but are neglectible like for PCs.

Think-global, act global is only partially possible, for example differences in culture prohibit global advertising campaigns. Regional/national specialities like the Monsoon introduce local specialities, which leads us to the next approach …

Think-Global, act-local approach, the hybrid between multicountry and global strategy, is the best choice for washing machines. Washing machines are goods that can be produced easily in one or two strategically placed locations on two or three sides of the globe to minimize shipping costs and use labor cost effects, leading to very beautiful economies of scale. Localization can happen through an import and distribution network. As the variations across markets are minor, things like power supply and plug types can be incorporated in a central production site. A good example of such a strategy is shown by Miele, which has global slogans like “There is none better” or “everything else is a compromise”, produces in Germany, Austria and China, but sells locally through a distribution network that is tailored to local customs (see FirmenPresse (2010)).

2.3 … for an online MBA degree

On online MBA degree seems to be something very straightforward in terms of strategic sense. Supervisors, pupils and a university interact over the internet. eBusiness in general can be considered to be truly global by nature, but inabilities of sellers to cope with internationalization dash out the global acting quickly.

Knowledge and the acquisition of knowledge works in very similar ways worldwide and requires just a shared language.

2.3.1 Back part of industry value chain

The back part of the value chain from the universities point of view are technology providers for elearning. Webservers, the essential part of an elearning application can stand everywhere, administration of these webservers can be done from anywhere. Instructors, can work anywhere, a good example is our instructor Abraham, who works in Dubai.

2.3.2 Front part of industry value chain

The distribution happens through the internet, the customers (pupils) can access the website from anywhere in the world.

2.3.3 Discussion

The online MBA degree part of this question is the easiest one to answer: of course Think-global, act-global is the best choice, this is the global strategy. Pupils identify themselve a lot with the university behind an MBA program, they do not want cultural adaptation or rebranding of a university name to fit their taste.

The university can build a global image, can drive advertising through global channels like the internet, it can even advertise with global mechanisms and patterns, as the reasons for visiting a university are worldwide the same: knowledge acquisition. Especially MBA programs are targeted at business professionals, which also dictates the advertising messages to use: become the best business leader, the intrinsic motivation of applicants eases advertising even more.

As it is not needed to build factories in host countries and to transfer physical goods between countries, the university is in the best position to concentrate on its core competencies: the knowledge transfer to pupils.

3 Conclusion

Having written this, I miss a fourth approach to strategy making inThompson/Strickland/Gamble (2010) on page 222: the Think-Local, Act-Global approach. Some research yielded AMEInfo (2002), which says “While the global offices remain sensitive to cultural and compliance issues in the markets they serve, the organization functions as an integrated, global enterprise. This model, reflecting the new economic realities of a 24/7 global marketplace, can be summarized as: “Think Local, Act Global.””.

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