PrinciplesofManagement-OP_mGBMvoU-40

Prévia do material em texto

Exhibit 6.7 Electric and Hybrid Vehicles In addition to Ford, many automobile manufacturers have taken a strategic decision to provide
electric and hybrid vehicles for the global market. Pictured here is the Toyota Prius hybrid electric vehicle. Toyota takes a regional approach to
its global operations. (Credit: Mariordo59/ flickr/ Attribution 2.0 Generic (CC BY 2.0))
Why do some companies pursue global strategies? One major reason is the nature of the industry in which
they operate. For instance, the automotive industry lends itself to global approaches because the use of the
product and the product being sold are similar worldwide. Thus, if there is the possibility of global markets
where global customer needs can be met, a global strategy works well. Additionally, as mentioned earlier, a
global strategy also enables cost savings. Because activities are not being adapted to local needs, a company
can enjoy the benefits of having the same operations worldwide and enjoying synergistic benefits.
Current discussion of research suggests that few companies are truly global. A recent examination of the
Fortune Global 500 companies found that only nine companies were truly global as measured by how sales
were globally distributed across a number of countries. These companies include Canon, Coca-Cola,
Flextronics, IBM, Intel, LVMH, Nokia, Philips, and Sony.
Regional Strategy
A regional strategy is one in which the company decides that it makes sense to organize its functional
activities, such as marketing, finance, etc., around geographical regions that play a critical role in terms of
sales. Toyota is an example of a company that has successfully implemented a regional strategy. Because
regions such as Europe and North America are sufficiently large but different markets, Toyota has decided that
it is worth customizing its operations by regions. In this case, the company has several regional offices that
operate independently of Japanese headquarters.
A regional strategy is appropriate if companies find that the benefits from dispersing their activities far
Chapter 6 International Management 187
outweigh the benefits of coordination. For Toyota, having independent units based on regions makes a lot of
sense because each region has specific needs that can better be addressed with a regional rather than a
global approach. For instance, consider that the price of gasoline is significantly higher in Europe than in the
United States. Using a regional approach to the design and manufacture of more- or less-fuel-efficient cars
makes much more sense than having a “one size fits all” car designed for a global market.
Local Strategy
The local strategy is the one in which a company adapts its products to meet the needs of the local market. For
instance, experts argue that despite the perception that customers want global products, significant cultural
and national value differences still suggest that some level of customization is necessary. This is especially
critical for some functional areas, such as marketing. People across cultures have different purchasing and
usage habits. Furthermore, they respond differently to promotional campaigns and other advertising
messages. In such cases, a local strategy may be necessary.
An example of a local strategy is McDonald’s product offerings in India.32 Given the taste and vegetarian
preference of India as well as the consideration that cows are sacred, the company famous for its hamburgers
does not offer any beef or pork products. Rather than offend its customers, McDonald’s restaurants in India
offer burgers made of potatoes and peas (McAloo Tikki); burgers made of beans, green peas, onions, and
carrots (McVeggie); and burgers made of paneer, India’s cheese (McSpicy Paneer). The only meats that
McDonald’s sells at its restaurants in India are chicken (McChicken) and fish. Furthermore, the products are
adapted to fit the local preference for spicy foods, and offerings such as the Masala Grill chicken and the
McSpicy Chicken.
Despite the attractiveness of a local strategy, it is not without disadvantages. The local strategy is much more
costly because it requires companies to duplicate resources and departments around the world. Additionally,
because of the differences in local activities and operations, it may be difficult for the company to achieve
learning or cost savings across subsidiaries. The nature of some markets, however, may require that a local
strategy be adopted.
M A N A G E R I A L L E A D E R S H I P
From Regional to Global
Bayer Crop Science is a division of Bayer, a leading global company based in Leverkusen Germany. The
Crop Science division’s main goal “is to be able to produce enough food, feed, fiber and renewable raw
materials for a growing world population on the limited land available.”33 It has been involved in many of
the latest innovations in agriculture, such as developing apps for farmers to help them understand their
crops, climates, and so on and developing the ability to use drones to assess crop quality.
One of Bayer Crop Science’s units is the Global Public and Government Affairs (GPGA) division, which is
in charge of monitoring and proactively complying with local government policies. In 2012, Bayer Crop
Science had a large number of independent country GPGA divisions that acted independently, thereby
limiting collaboration and cooperation. As a result of this regional strategy as described earlier, critical
information about policy priorities from different regions was slow to reach headquarters, and Bayer
188 Chapter 6 International Management
This OpenStax book is available for free at http://cnx.org/content/col28330/1.8
Summary
Companies choose international strategies based on their capabilities and skills as well as on the structure and
nature of the industry in which they operate. Companies choose regional strategies if they feel that the
regions have differences significant enough to justify such an approach. In contrast, companies elect a global
strategy if they believe they have global products that can satisfy global consumer needs.
It is important to note, however, that companies rarely adopt the pure forms of strategy as we’ve described
them. Many companies adopt hybrid structures, where some functional areas may be approached globally
while other activities may be approached more regionally or locally.
6.7 The Necessity of Global Markets
7. Why might it be necessary for a company to go international, and how might it accomplish this goal?
In this section, we explore some of the methods companies can use to go international and how they might
Crop Science was not able to quickly address policy challenges worldwide.
In 2013, Bayer Crop Science hired Lisa Coen to implement a more global strategy in the GPGA division.34
Her main task was to make the GPGA division a truly global organization. To accomplish her task, she
first travelled extensively around the world to meet with the business unit leaders and the public affairs
team members. Through this process, she wanted to engage with the key stakeholders to prevent any
resistance to change from building up. During these meetings, she discovered that the various local and
regional GPGA units had deep knowledge that would greatly help Bayer Crop Science face and manage
public policy issues all over the world. The meetings also allowed her to come up with the best strategy
to turn the various regional units into a global unit.
To build a more collaborative organization, Coen had to move from a traditional and hierarchical
organization based on regions to a globalized network of units. To demonstrate the need for such a
system, Coen invited key individuals to a global meeting to work collectively on public policy issues.
Through this exercise, she was able to show the group the critical importance of a network organization.
Through team-building exercises, Coen showed how the entire group had to move around to meet with
the key people in each region.This interaction allowed the group to commit to a network model that
would support and build a global organization.
Discussion Questions
1. Why did Bayer Crop Science decide to move from its original regional organization of units to a
more global network of units? What were the advantages and disadvantages of this approach?
2. How did Coen build support for the change? Do you believe this was an appropriate way?
3. What challenges do you anticipate as Coen continues to build a network organization?**
C O N C E P T C H E C K
1. How and why do companies take various approaches to global operations?
Chapter 6 International Management 189
implement them. As we have seen so many times before, each method for entering international markets has
its advantages and disadvantages, and it is up to the international management team to figure out which is
most suitable for its company and for the countries in which it operates.
Reasons for Internationalization
Before we get into how companies can go international, let’s look at why a company might want to expand
internationally in the first place. Because navigating cross-cultural environments is fraught with dangers but
holds the possibility of great success, we must understand the compelling reasons to go international.
Trade Facilitation
At a basic level, relying on a domestic market can be problematic. Because of the many factors enhancing
globalization, companies of all sizes and types want to take advantage of global markets to expand and
achieve sustainable competitive advantage. Despite some slowdown in trade, business-to-consumer e-
commerce is expected to double to $2.2 trillion over the span 2018 to 2021 due to improvements in IT and the
use of the web.
Growth Opportunities
Another critical factor that supports internationalization is that emerging markets such as China, India, Brazil,
and Malaysia will continue to grow and present companies with tremendous opportunities. Research from the
Boston Consulting Group suggests that such emerging markets experienced growth (as measured by GDP
growth rate), surpassing more developed economies by 2.2%.35 Furthermore, this research predicted that
economic growth in emerging markets accounted for 68% of worldwide growth in 2013 despite an economic
slowdown. Finally, experts also predict that incomes in emerging markets will continue to rise.
How to Go International 1: Exporting
Given that it is critical for companies to go global, there are various means that companies can use to do so.
The most basic and cost-effective approach is exporting, whereby a company sends its product to an
international market and fills the order just as it fills a domestic order. Our earlier example of Dmitrii
Dvornikov (who was selling jewelry and table clocks made from Russian semiprecious stones to international
customers on Russia’s eBay) is a simple example of exporting. However, companies can also become more
involved in the process and have dedicated offices in another country to tackle exports. In fact, some
companies may find that exporting is so critical that they create a dedicated export department.
Because exporting is one of the easiest ways to go international, it can bring many benefits.36 Current
research suggests that companies that export tend to be 17% more profitable than companies that don’t.
Additionally, exporting provides the ability for companies to defend their markets by becoming more
competitive in other markets. Furthermore, by exploring international markets, a company can acquire critical
cross-cultural management skills, thereby increasing the value of the company. Consider the case of DeFeet
International, a U.S. maker of socks for cyclists.37 Despite several major disasters during the company’s
existence (it burned down in 2006), DeFeet has been able to survive and expand thanks to the global market.
The company hired an international marketing manager to get advice on how to develop a market strategy for
Europe. Because of its strong research and development, DeFeet International has been able to develop the
best socks for cycling. While production still takes place in the U.S., exporting has resulted in distributors in
190 Chapter 6 International Management
This OpenStax book is available for free at http://cnx.org/content/col28330/1.8
over 35 countries.
Despite the many benefits of exporting, companies are often reluctant to do so. Much of such fear is based on
some assumptions about how business is done. For instance, managers often assume that exporting can be
too risky, but some argue that selling only to domestic markets is just as risky. Some companies believe that
exporting is too cumbersome or that getting paid for exports is too complicated and not worth the time.
However, experts believe that exporting is not as complicated and can be easily done through the right
channels. Finally, some companies believe that they are too small to export. However, research shows that
nearly 30% of all U.S. exporters in 2005 had 19 employees or less.38 This finding suggests that exporting is a
viable strategy, even for small firms. To give you more insights into these assumptions, Table 6.10 summarizes
some of these myths and counterarguments.
Myths About Exporting and Counterarguments
Myths Reality
Exporting is risky. Selling domestically is as difficult as exporting to some markets. Additionally,
not all markets are necessarily risky.
It is difficult to get paid
for exports.
Buying and selling internationally is now fairly routine. There are numerous
ways to ensure reliable payment.
Exporting is so
complicated.
Exporting requires minimal paperwork. It is now very easy to search for
buyers using the internet. There are many intermediaries available to help
with exports.
I can’t succeed because I
don’t speak another
language.
As mentioned in the chapter, there are many organizations offering help with
translation etc. Setting up global websites can be seamless now.
My product won’t do well
in other markets.
If you do well in the U.S., your product will probably do well in other
countries. There are many services available to test the market.
Based on U.S Department of Commerce, "A basic guide to exporting," 11th edition, 2015,
https://www.export.gov/article?id=Why-Companies-should-export
Table 6.10
Solving a Disadvantage of Exporting through Licensing and Franchising
Although exporting is an easy way to go international, it has some disadvantages. Exporting does not give
much control to the company in terms of how the product is presented in the international market. For
instance, if the company decides to use an international intermediary to sell its product abroad, it is at the
mercy of that intermediary. Additionally, exporting sometimes requires travelling and other tasks that may
take managers away from domestic activities. In the light of such disadvantages, companies will often resort
to licensing.
Licensing is a contractual agreement whereby, in exchange for a royalty or fee, a company gives the right to
another company to use a trademark, know-how, or other proprietary technology. Similar to exporting,
licensing is an easy way for a company to enter an international market quickly and without the need for
Chapter 6 International Management 191
	Chapter 6. International Management
	6.7. The Necessity of Global Markets*