Posted: May 25th, 2022

Managing in a Global Environment 7 pages

Managing in a Global Environment

International market growth has become a significant priority for a large number of companies. Therefore it has become necessary to create a strategy that makes the company compete with effectiveness in global markets to become successful. The company would have to create a strong competitive base in a wide range of disparate markets keeping in mind competition that is bound to arise from regional and local competitors as well as other companies that are operating on a global scale. For example when Coke, went to India it had to face locally entrenched competition from Thumbs Up and from Pepsi that had already started operations. When setting up a global competitive position it is necessary to keep in mind the spatial configuration of assets and resources and to analyze not only the similarities and differences in the operating environment, but also take into consideration the rhythms of market interdependence and the forces that are pushing towards more market integration. (Configural Advantage in Global Markets)

Quite often, when markets are located far away from each other and independent fro each other too, the company will have to compete in several different markets and have to alter its positional advantages based on the requirements of the local markets. Simultaneously it is necessary to have mechanisms to coordinate these positions developed by improved harmonization and integrating and interlinking activity processes across the markets. This could provide an additional bonus in that the company develops capabilities for crossing international borders with the competitive edge in managing activity systems in global markets. These become very important as markets get integrated as it provides the capacity to effectively leverage the spatial configuration of the company’s assets and resources in the international markets. (Configural Advantage in Global Markets)

By itself this creation of a configurable advantage in international markets and the development of efficient strategy to take on competition are not sufficient. Along with this it is necessary that the company develop management systems and capacities to build and keep tat advantage and give strategic flexibility in the possible changing market dynamics, resource conditions and competitor configurations. It is also essential to develop information transfer systems that enable experience and ideas from one area of operation to another to provide a stimulus for organizational learning. It is only then that the company can make use of the diversity of its experience and exposure and the knowledge base of its resources to develop a strong configurable advantage in global markets. (Configural Advantage in Global Markets)

McDonalds is among the most recognized brands in the world. It has almost 29,000 restaurants spread over 120 countries and with $40 billion as revenue every year. McDonald’s had humble beginnings selling hamburgers in the heartland of America in 1955. In those days its founder Ray Kroc would not have envisaged the phenomenal growth of the brand and its spread into international markets. Now more than fifty percent of McDonald’s operations are outside the U.S. And a similar percentage of the operating income coming from off shore. Faced with domestic market saturation and the requirement of growth from shareholders McDonald’s started globalizing aggressively and did it successively. The first entry barrier it faced was funding, as McDonald’s is a capital-intensive operation. McDonald’s invest in the land and building to the tune of $1 million for each restaurant, the franchisee contributes $500, 000 towards the other costs in setting up the operation. (Expanding Across Borders)

Most of this funding comes from multinational and local banks. The policy at McDonalds is to as far as possible create the necessary finances for an operation in the same currency that their sales will give them. So there is a large level of interaction required between the financial executives at McDonald’s and the local financial institutions. This liaison for McDonalds starts at the time of researching the location before the start of the operations and has proved successful. Another area of concern for McDonalds initially was currency volatility. They still carried on with the dependence on local currency for operations in any country, as it was a part of their strategy theirs was a long-term investment and it would pay off in the long run. Brazil is an example where this strategy has paid off. McDonalds has been in Brazil for more than 20 years and now Brazil has turned out to be one of the largest markets. (Expanding Across Borders)

Looking at the operations of McDonalds in Asia it is easy to discern a different approach in the different markets. In Japan where development has been the foremost and is similar to the U.S., the operations are very similar to the American operations. In China and India McDonald’s faces stiff local family owned well-entrenched competition and so in an attempt to be more than competitive in these markets McDonalds adopts the strategy to of hiring local expertise or going in for joint ventures. This also helps in overcoming governmental hurdles in these markets. McDonald does a large amount of research before entering unfamiliar areas. Another strategy of McDonald’s has been to alter the menu to suit the local conditions. In India beef products are not popular especially in Northern part of India. The menus in do not have beef products and in place are a variety of chicken burgers made with local flavoring too. (Expanding Across Borders)

King C. Gillette believed that safety razors, the flagship product of Gillette, are the universally most known product of individual use with a spread over practically every nook and corner of this world. Today just a little more than a hundred years since Gillette was formed it is quite likely that a Gillette safety razor or its later derivatives will be seen in every nook and corner of the world. In this period Gillette has gained held and strengthened its leadership place through the strategic management of its business with a long-term global perspective. This ability to produce long-term in a dynamic global market place is due to several fundamental strengths. These would include the continual and increasing gathering of scientific knowledge in core business, innovative products that show useful technological advances and a large manufacturing capacity that brings out billions of flawless products annually in a reliable, efficient and cost effective manner. This ability of Gillette to transform innovative ideas into useful products of daily uses and sold at a reasonable price is another basic strength of Gillette that has left it with strong and enduring consumer brand loyalty all around the world. (Gillette at a Glance)

Adroit marketing of superior technology to reach worldwide leadership has been the goal of Gillette. This is a goal often seen in companies that are big and healthy, with huge potential derived from normal market activity as well as the growth driven by new products. This can be clearly seen in the companies powerful grooming, battery and oral care franchises. The tremendous growth seen in the twentieth century clearly marks Gillette without peers in the grooming business. Using the scientific knowledge it has with the technical capability to create and manufacture hair removal products that give a superior shave whether wet or dry for both men and women Gillette has also created a range of premium quality shaving products and after shave products. Additional presence in the market and support is seen in the form of deodorants and antiperspirants that are well stabilized in the market. Batteries are another growing global business in which the company has successfully competed. Duracell is the most popular brand of alkaline batteries worldwide and is the global leader in this market. (Gillette at a Glance)

Another major world-wide business offering significant growth facilities for the Company is oral care. Oral care has been Gillette’s rapidly-growing business in the last few years. Gillette’s Oral-B brand maintains the world leadership positions with regard to manual and power toothbrushes. Again in relation to businesses of grooming, batteries, and oral care, Gillette has a tremendous list of global brands. And all of them are poised for growth as a result of its product performance and price points which attract new consumers along with its loyal customers. Oral care provides a significant opportunity as consumers go up from regular Oral-B manual toothbrushes to the premium-priced CrossAction manual toothbrush, and then finally progress towards the power-assisted Oral-B toothbrushes which promote a major profit-oriented business of brush-heads. These major global brands are the strength of Gillette and they show the global commitment to growth by means of innovation, which give Gillette long-term success as a global leader in the field of consumer products. (Gillette at a Glance)

Pharmaceutical giant Johnson and Johnson won the top honor in global Corporate Achievements Awards for the year 2002 for the Americas region. These achievement awards are organized by the Economic Intelligence Unit, which were created to recognize Organizations that have given tremendous performances even when the conditions have been volatile. The leadership of Johnson and Johnson along with the other finalists is looked upon as having the capability to succeed even in volatile times. Johnson and Johnson have leveraged technology to become efficient bit more significantly it has been used to drive their business aims. In addition the company understands the human element. (Johnson & Johnson Wins Global Corporate Achievement Award)

In their business and have built a distinct culture that plays a key role in their success. The company couples a strong research and development effort along with an aggressive takeover strategy. It has a decentralized structure with about 200 autonomous business activities that help make acquisitions a success. The leadership is low key and the leadership promotes decentralized decision making coupled with an ironclad accountability to produce results. On the innovation front, more than a third of its sales are generated from products launched in the last five years or from existing products introduced into new markets. (Johnson & Johnson Wins Global Corporate Achievement Award)

Pepsi has been tremendously devoting its energy to make supermarkets to adopt its ‘Power of One’ program relating to marketing. The basic theme is to put snacks and soft drinks in a combined manner in the supermarket. When someone raises a thirst, another person satisfies it. Predictors are of the opinion that it is a really superb theme. It is a reasonably good strategy, but it is difficult to implement it since it is because the retailer will not be able to forget about Coke in the end. Such a view has been put forward by Jennifer Solomon, a beverages analyst at Salomon Smith Barney. Along with others in this field she is of the opinion that the strategy would provide Pepsi more clout in the supermarket. “Power of One will make a difference,” says Prudential’s Thompson. “It won’t be a blow out in the first quarter, but it will create a steady increase [in sales] over the next few years.” (Is Pepsi’s Stock Finally Ready to Pop?)

One of the largest growth opportunities available for Pepsi is in the business of orange juice. This is only a small portion of Pepsi’s total sales, but it is likely to catch up, as a result of the trend of the importance of healthier eating in the country. The profits of ‘Tropicana’ increased by 54%; this was to reach a mark of $54 million in the last phase of the year 1999. Apart from orange juice, along with Aquafina, Lipton’s Iced Tea, and Starbucks Frappucino, Pepsi has among the top-most drinks in the U.S. These are marketed in the forms of bottled water, ready-to-drink iced tea, and coffee categories throughout the country. All of these products are receiving a major performance. (Is Pepsi’s Stock Finally Ready to Pop?)

It is in the global markets outside the U.S. where the real potential of Pepsi’s growth lies. In soft drinks it has followed a strategy to grow in markets like India, where Coke is finding the going tough. The company has started to focus on markets in Asia and Eastern Europe in a large way and results may take some time. From 1998 to 1999 the growth of Pepsi on then international front was six percent to reach $1.8 billion. The real gem in the range of Pepsi products is Frit-Lay and Pepsi holds more than eighty percent of the Mexican snack market. Mexico contributes fifty percent to Pepsi’s international revenues, with Britain coming second at twenty five percent. Frito-Lay is planning to grow by a judicious acquisition program. (Is Pepsi’s Stock Finally Ready to Pop?)

AT& T. announced a group of VOIP initiatives including an expansion of its international VOIP remote worker pilot project. Its traditional long-distance business activity has come under tremendous competitor pressure. It sees Internet calling and its accompanying products as a means to pave the way to new markets and revenue streams. AT& T. plans to sell more bandwidth both in the U.S. And in the global markets as part of its strategy for growth. Internationally AT& T. plans to target the large multinational corporations and in keeping with this objective has started the VOIP remote project involving companies having locations at Hong Kong, Singapore, Australia, and the UK. (AT& T. woos international markets with VOIP products)

References

AT& T. woos international markets with VOIP products. Retrieved from http://www.infoworld.com/article/04/09/22/HNattvoip_1.html?VOIP Accessed on 12/08/2004

Craig, Samuel C; Douglas, Susan P. Configural Advantage in Global Markets. Retrieved from http://pages.stern.nyu.edu/~sdouglas/rpubs/config.html Accessed on 12/08/2004

Expanding Across Borders. Retrieved from http://www.thunderbird.edu/about_us/publications/tbird_mag/vol54_no_2 / Accessed on 12/08/2004

Gillette at a Glance. Retrieved from http://www.gillette.com/company/gilletteataglance.asp Accessed on 12/08/2004

Is Pepsi’s Stock Finally Ready to Pop? Retrieved from http://www.businessweek.com/2000/00_15/b3676011.htm Accessed on 12/08/2004

Johnson & Johnson Wins Global Corporate Achievement Award. Retrieved from http://www.us.capgemini.com/ind_serv/industry/lifesciences/current_news.asp?ID=259 Accessed on 12/08/2004

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