Transcript The Triad Framework

DECISION FRAMEWORK
Developed Markets
Emerging Markets
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Developing Markets
Key Decisions: Product Design, Choosing an Entry Mode,
Targeting, Building Brand Equity
Decision Criteria for Country
Selection
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Market Size and Growth
Risk (Political & Economic; Internal & External)
Government Regulations
Competitive Environment
Local Infrastructure
Country Classification
– Platform – gathering intelligence and establish a network
(Singapore, Hong Kong)
– Emerging Market – Vietnam, Kazakhstan
– Growth Markets – The Czech Republic, China, Brazil
– Maturing Markets – Japan, Germany
The Triad Framework
NAFTA
EU
•US
Total Population –
460M
•Canada
GDP - $12.86
•Mexico
Total Population – 425M
GDP - $17.1 trillion
Elements from:
•China –GDP $10T, Population – 1.3B
•India – GDP $4.0T, Population – 1.1B
•Japan – GDP$4.22, Population
– 127M
•Australia GDP –
$666B,Population
– 20M
•New Zealand –
GDP $106B,
Population – 4M
The Trouble with India
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India has under invested in infrastructure for 60 years and are 10 to 12 years
behind
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Crumbling roads, jammed airports, and power blackouts could hobble growth
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With no transit in Bangalore, Indian technology firms Infosys technologies ltd.
Spends %5 million a year on buses minivans, and taxis to transport its 18,000
employees to and from Electronics City.
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Growth is running at 9% plus this year
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Real estate prices have shot through the roof with some prices doubling in the
past year
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Highways, modern bridges, world class airports ,reliable, and clean water
desperately fall short in supply
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Economic losses from congestion and poor roads alone are as high as $6
billion a year
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Intel recently chose Vietnam as opposed to India because of the lack of
reliable power and water in India
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This is why India’s exports are less than 1% where China’s is 7%.
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If the infrastructure development gets delayed ,the economic development, job
creation, and foreign investment get delayed as well
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GDP growth would run 2% points higher if the country had decent roads,
railways, and power
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The problems are even contributing to overheating in the economy
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India today is where China was a decade ago
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Fortunately after decades of under investment and political inertia, India’s
political leadership has awakened to the magnitude of the infrastructure crisis
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Example : The first phase of a new subway in New Delhi was completed in
2005
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On the whole there are so many infrastructure challenges, but also there are a
lot of opportunities to assist meeting those challenges
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This is why so many multinational companies are flocking to India ranging
from tourist class hotel rooms to telecom
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While the laws of supply and demand would indicate that India’s infrastructure
gap can be filled, that logic ignores the corrosive effect of the country’s
politics
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None of the solutions to India’s infrastructure challenges are simple, but
business leaders some enlightened government officials, and even ordinary
citizens are chipping in to help make things better
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Unless the nation shakes off its legacy of bureaucracy, politics, and corruption
its ability to build adequate infrastructure will remain in doubt as will its
economic destiny
The Chinese Century
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Already a commercial giant, China is aiming to be the worlds next great power
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You may know all about the world coming to China – about the hordes of
foreign business people setting up factories and boutiques and show rooms,
but you probably know less about how China is going out into the world
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Through its foreign investments and appetite for raw materials, the worlds
most populous country has already transformed economies from Angola to
Australia
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At present China is turning that commercial might into real political muscle,
striding onto the global stage and acting like a nation that very much intends to
become the world’s next great power.
• China seems ready to challenge and possibly even undermine some of
Washington’s other foreign policy goals
• China is still a poor country whose leaders face so many problems
• China is an environmental dystrophic, its cities air foul beyond
imagination and its clean water is scarce
• The most immediate priority for China’s leadership is less how to
project itself internationally than how to maintain stability in a society
that is going through the sort of social and economic change that, in
the past, has led to chaos and violence
• Chinas objective is to ensure a steady supply of natural resources, so
that its economy can sustain the growth that officials hope will keep a
lid on unrest at home
• This is the reason why china has reached out to resource rich
democracies like Australia and Brazil as much as it has to such
international pariahs as Sudan and Burma
• Assuming a bigger global presence has forced Beijing to learn the art
of international diplomacy
• Within its own neighborhood there are signs that Chinas behavior is
changing in more constructive ways
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Today Chinas relations with its neighbors are viewed as positive at the
expense of the US.
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There are some China watchers who fear a point to two factors: modernization
of China’s defense forces and the risk of war over Taiwan
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China’s military spending has increased nearly 300% in the past decade
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After 200 years Chinas prospects are now better than ever and the
opportunities of its people improve each year
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As China gets richer its population will press for a more democratic freedoms
and its ruling elite mindful of the need for change will grant them
Three Dimensional – The markets of Japan, Korea, and
China
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Asia is one of the worlds most dynamic regions, and offers multiple
opportunities for business and investors
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Asian consumers have different tastes, preferences, and moderated by different
income levels.
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A tendency has occurred to group these countries together but should not be
done because they are so different
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GDP and purchasing power
– o Japan – $4.80 trillion, $4 trillion
– o China - $1.84, $7 trillion
– o Korea - $.72 trillion, $1 trillion
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Japan Korea and China differ in their brand orientations, attitudes toward
domestic and foreign products, quality and price perceptions, and product
feature preference
Brand Orientation
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Japan
– Most brand conscious and status conscious
– Love high end luxury goods
– Country represents 20% of Gucci’s world
– Prefer brands that contribute to their senses of identity and self expression
– Highly group oriented consumers
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Korea
– Sophisticated tastes
– Show immense passion for new experiences and favor premium and expensive imported
products
– Great interest in generational fads and select products that follow their generations
judgments and preferences
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China
– Prefer luxury goods
– Brand and status conscious
– Consider luxury goods to be personal achievements, bringing higher social status
– Purchasing behaviors are regional
– Fourth largest market
– “The new Japanese”
– Wealthy people hungry for brands and fanatical about spending
Domestic VS. Foreign
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Japan
– Consumers extremely demanding and have different perceptions of product made in other
countries they are generally accepting of quality foreign products.
– Dominated by well established companies such as Canon, Sony, and Toyota
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Korea
– Consumers hold negative attitudes toward foreign businesses; the majority believes that these
businesses transfer local wealth to other countries and crowd out small establishments
– Consumers very product and demonstrate a complicated love hate relationship with foreign
brands
– Korea campaigns require significant re-branding – use of localized brands to influence local
perceptions
– Country is increasingly comfortable with the presence of foreign companies
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China
– Attitudes toward foreign products differ depending on consumers age groups
– Believe imported products under foreign brands names are more dependable
– Foreign companies such as Nike Nokia Sony have replaced well known brands
– Country’s consumers are inspired by design and function they prefer domestic brands because
of their food value for the money
Quality and Price
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Japan
– Consumers are the worlds strictest when it comes to demand for product quality
and they clearly articulate their needs desires about a product or package
operation
– Foreign companies don’t fully understand and meet consumers needs
expectations struggle with their investments
– To cater to them manufacturers have adopted a total quality approach
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Korea
– Consumption has been sluggish since the financial crisis of 1997-1999
– Younger generation is at the forefront of a new and emerging patter and holds
opposing expectations of preferences for low priced and high priced goods
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China
– Price sensitive and try to safeguard their income for investment
– Market is lucrative with growing demand foreign brands
Technology Features
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Japan
– o Consumers prefer high tech gadgets
– o Consumer are willing to pay for better cooler features and technological
sophistication
– o Because of small living quarter, manufacturers have become experts at
minimizing and creating multifunction devices
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Korea
– o Most wired country in the world is a leader in internet usage and high the
industries such as mobile phones, liquid crystals, and semiconductors
– o Cyberspace reaches more than ¼ of the population
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China
– o Imperative for companies o understand the major difference in consumer
behavior between generations
– o Young consumers are passionate about the latest developments
– o 40’s and 50s consumers are price conscious, brand loyal, and less sensitive to
technology
Recommendations
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Marketers need to tailor country specific strategies to target consumers in
Korea, Japan, and China
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The existence of strategically equivalent segments suggests a geocentric
approach to global markets
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Similarities allow for standardized strategies across national boundaries
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Companies not only preserve consumer orientation, but also reduce the
number of marketing mixes they have to offer
Regulatory Environment – Federal, State,
Municipal
Background
• As the US economy became more industrialized in the 19th century, the federal government
paused business laws that favored social reforms over the interests of big business.
• In the 20th century, government involvement continued to expand until the 1970, when both
business and the public began to call for less regulation.
•At the beginning of the 21st century the ruinous effects that utility deregulation had on
California’s economy and the corporate accounting scandals raised the possibility of increased
federal intervention
Samuel Rabino
Key past legislations:
• Sherman Antitrust Act (1890)
• Clayton Act (1914), outlawed unfair methods
of competition; the creation of the FTC
enforcing the legislation
• 1970s – Increased governmental intervention
(environmental regulations, wage and price
controls)
Samuel Rabino
• 1980s and 1990s – Deregulations. Results:
bank failures costing the government more
than $1 trillion, bankruptcies and energy crisis
in California. In 2001, Enron the energy
trading company was found guilty in using
deceptive accounting practices
Samuel Rabino
Highlights of the American legal
system
• The US congress – Power is spelled out in the US constitution
including commerce between states and civil rights
• State constitutions – similar to the Federal constitutions (can
provide more provisions eg. Freedom of speech, but not less)
• Members of congress have the exclusive authority to introduce
legislation to the floor of either the House of Representatives or
Senate. The President may sign bills introduced in the Congress.
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• Federal legislation is superior to state legislation
• Congress may include a provision that an area of the law will
be governed only by federal legislation (retirement income
security, toxic control)
Municipalities (Local government entities)
• These bodies (city, council, board of supervisors) enact
ordinances that apply specifically to their own locality (public
safety, revenues, etc.)
Samuel Rabino
HENKEL CASE
Theoretical & Strategic Cosiderations
FRAMEWORK OF GLOBAL STRATEGY
FORCES
Position and
Resources of
Business and Parent
Company
Appropriate Setting for Global Levers
Benefits/Costs of
Global Strategy
•Major Market Presentation
•Product Standardization
•Activity Concentration
•Uniform Marketing
•Integrated Competitive Moves
Industry Globalization
Drivers:
• Major Market
• Cost Factors
• Environmental Factors
• Competitive Factors
Organization’s Ability
To Implement a Global
Strategy
The EPRG Framework
(Companies’ Philosophies on International Involvement)
Ethnocentric Orientation:
Firms are guided by a domestic market extension concept.
(Disney – in the past)
Polycentric Orientation:
Firms are guides by a multi-domestic market concept.
(Some of the car companies)
Regiocentric Orientation:
Firms view world regions as distinct markets.
(Pepsi Co., Otis)
Geocentric Orientation:
The world is perceived to be a potential market regardless
of geographic location or nationality.
(McDonalds, IBM)
Thank
You