Transcript China

DECISION FRAMEWORK
Developed Markets
Emerging Markets
*
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
•Japan – GDP$4.22,
Population –
127M
•Australia GDP
–
$666B,Populati
on – 20M
•New Zealand –
GDP $106B,
Population –
4M
Elements from:
•China –GDP $10T, Population – 1.3B
•India – GDP $4.0T, Population – 1.1B
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
A Model For Selecting Foreign Markets
1. Macro Level Research
3. Micro Level Research
(General Market Potential)
(Specific Factors Affecting the Product)
Existing and potential competition
Ease of entry
Reliability of information
Sales Projections
Cost of Entry
Probably product acceptance
Profit potential
“Feel”
Economic statistics
The political environment
Social structure
Geographic features
Preliminary Opportunities
2. General Market Relating
to the Product
Growth trends for similar products
Cultural acceptance of such products
Availability of market data
Market size
State of development
Taxes and duties
Possible Opportunities
Rejected
Countries
Probable Opportunities
4. Target Markets
Corporate factors affecting
implementation
Country Priority Listings
Opportunity Matrix
Market Opportunity
L
M
H
H
M
Business & Political Risk
Measured Over Time
L
Market Stage
Infancy
1.
Customers
2.
Product Introduction
3.
Distribution
4.
Price
5.
Competitive Strategies
Developing
(Types of after markets.)
Mature
Criteria Used in Choosing Entry Strategies
External Criteria
Internal Criteria
Market risk factor
Time orientation
Competition in the market
Need for control
Political conditions
Degree of internationalization
Market conditions
Urgency of going international
Future market potential
Ability to handle international risk
Availability of desired distribution outlets
Availability of venture capital
Availability of know-how
Entry Decisions: Strategic Parameters
Input
Process
Output
A strategic plan including:
* Motivation(s) for entry
* Inventory of own
resources
* Inventory of competitors
resources
* Market intelligence
* IP protection
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Decision rules for
site(s) selection
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* Mode of entry
(risks control, legal issues)
* Operational and
implementation progra
International Market Entry – Funnel Approach
Regional Focus
• The “Triad”
Japan
North America
Europe
Mode of Entry
Identification
of
A Lead Country
(Function of the
Firm Size)
• Emerging Markets
Latin America
Venezuela
Argentina
Brazil
Columbia
Chile
Trading companies
Exporting
Licensing
Regional Focus
Using an entry into one
National marketing as
a stepping stone for
launching market
Penetration into other
markets
Manufacturing
Joint Ventures
Strategic Alliances
Management Contracts
Pacific Basin
China
India
Middle East
Or various clustering
schemes
e.g. “seekers” vs.
Climbers*
•Less Developing Regions
*A popular clustering approach consists of criteria such as development level (urbanization, life expectancy, infan
mortality, literacy rte, per capita GDP), Economic Performance (GPD, inflation, investment foreign trade and debt,
etc., and Political and Economic Liberalization.
The Spectrum of International Business Involvement
Inactive
Exporting
Licensin
g
Proactive
Exporting
Joint
Venture
Franchising
Turnkey
Contract
Less
involved
Strategic
Alliance
Management
Contract
Direct
Investment
More
involved
Contractual
Relations/Arrangements
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