Global vs Local

Topics: International trade, Transaction cost, Theory of the firm Pages: 11 (2098 words) Published: April 17, 2012
Competitive strategies: Global vs. local
© Professor Daniel F. Spulber

Global competitive strategies The G5 Platform strategy Network Strategy Intermediary strategy Entrepreneur strategy Investment strategy


Global competitive strategies
• Home, supplier, partner, and customer countries of competitors – differences as sources of competitive advantage • Differences in global value connection • Differences in products, brand, technology • Differences in impacts of political, legal and regulatory climate – trade agreements, home country policies Design global competitive strategies for competitive advantage 3

Global competitive strategies
Competitive advantage must be relative to both global and local competitors: Unilever in US: Breyers, Nestlé in US: Dreyers Ben and Jerry’s, Good Humor, Klondike, Popsicle

The great ice cream battle

UNILEVER in India – Kwality Wall Hindustan Lever faces successful local competitor • Gujarat Cooperative Milk Marketing Federation (GCMMF): India's largest food products marketing organization. • Two million farmers in the cooperative • Slogan: “A taste of India” • PRICE: 10 rupees (20 cents): 100 milliliter Amul ice cream versus 80 milliliter Hindustan Lever Kwality Wall vanilla ice cream • ADVERTISING COSTS: Amul: 1% of sales versus Hindustan Lever: 10-15% of sales on advertising 5

Umbrella brands: Nestlé products in the supermarket. Some products carry both global brand and local brand. 6

Global platform strategy The global challenge Global market size: standardization Local differentiation: customization Strategy: Determine best combination of global and local activities for competitive advantage


Global platform strategy
Forces calling for global products (standardization): • Convergence in customer preferences and income across target countries with economic development and trade • Competition from successful global products • International brand awareness • Cost benefits from standardization • Falling costs of trade with greater globalization


Global platform strategy
Forces calling for local products (customization): • Differences in customer preferences and income across target countries • Build local brand recognition • Competition from successful domestic products • Regulatory requirements (quality, safety, technical specifications, domestic content) -- EU product standards • High costs of trade create separate markets


Global platform strategy
Reduces development and production costs Used in automobiles, mobile phones, computers, aircraft Example: Cost per product (development and mfg): $80 Cost of basic platform development: $100 Cost of each variation (development and production): $50 Use platform when serving four or more customer country markets: Compare costs of serving four markets: Distinct products: 4 x $80 = $320 Platform and 4 variations $100 + 4 x $50 = $300 *** 10

Global platform strategy Product variety versus economies of scale Business sells 10 units each in Country A and in Country F • Unit costs – economies of scale Two local products at 10 units each $ 30/unit Global product at 20 units $ 20/unit • Price company can charge per unit: Global product: $80/unit in each country Two local products: $95/unit in each country Global versus regional product: Tailoring brings $ 5 more earnings per unit Profit greater by $ 100 Improve tradeoff with platforms and flexible factories to realize economies of scope (mass customization) 11

Global platform strategy
International business managers make decisions about what should be global versus local: • Products • Technology and inputs • Manufacturing • Brands • Marketing • Distribution Example: Wal-Mart must compete with both international players such as Carrefour and local retailers


Global platform strategy Local brand positioning of a global brand and global product • Corona sells the same beer, produced in 8 plants in Mexico, all over the world •...
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