Functional Area
Excellence
I M & IHRM
International Business
Strategy
301LON
Unit: 5 Knowledgecast: 2
Module Learning Outcomes
• Communicate an in-depth understanding of the
complexity of the environment and its applications
on decision-making process
• Assess current developments in the organisational
environment and alternative responses related to
strategy
Organizing Framework for
Marketing in the International Firm
Market Segmentation
•
The process of dividing the firm’s total customer
base into homogeneous clusters that allows
management to formulate unique marketing
strategies for each group.
•
Within each market segment, customers exhibit
similar characteristics, including income level,
lifestyle, demographic profile, or desired product
benefits.
•
Internationally, common market segment variables
include income level, culture, legal system, etc.
Global Market Segment
•
•
•
A group of customers that share common
characteristics across many national markets.
Firms target these buyers with relatively uniform
marketing programs, regarding product, pricing,
communications, and distribution
Such segments often follow global media, embrace
new fashions or trends, and have much
disposable income.
Examples
• Young people worldwide (e.g., MTV, Levi’s)
• The global segment of jet-setting business executives
• People worldwide with elevated cholesterol (e.g., Pfizer and
Lipitor)
Standardization and
Adaptation
•
Adaptation: Modifying elements of the marketing
program to accommodate specific customer
requirements in individual foreign markets
•
•
Standardization: Efforts to make marketing
program elements uniform, so as to target entire
regions of countries, or even the global
marketplace, with a similar product or service
•
•
E.g., industries in automaking, publishing, furniture
Targeting the same product everywhere not usually
feasible
Goal: To strike some ideal balance between
adaptation and standardization
Tradeoffs Between
Standardization and Adaptation
Standardization is pursued
when:
• Global market segments
exist
• Products have universal
specifications (as in
industrial
products)
Complete
Standardization
Advantages:
• Cut costs
• Improve planning and
control
• Do global branding
Adaptation is pursued when
the market has unique
characteristics based on
language, culture, regulations,
income level, economic
conditions, infrastructure
Complete
Adaptation
Advantages:
• Meet customer needs more
precisely
• Differentiate products
• Comply with government
regulations
Global Product Development & Branding
•
In developing international products, managers emphasize their commonalities
across countries rather than the differences between them.
•
A basic product incorporates only core features that are then varied at the
margins for individual markets.
•
A global new-product planning team is a group within a firm that determines
which product elements will be standardized and which will be adapted locally,
and how products will be launched.
Well-known global brands include: Electronics (Playstation), personal care
products (Gillette), toys (Barbie), food (Cadbury), beverages (Heineken), credit
cards (Visa), movies (e.g., Star Wars), pop stars (Shakira), and sports stars
(David Beckham).
•
A strong global brand enhances:





Efficiency and effectiveness of marketing programs
The ability to charge premium prices
The firm’s leverage with resellers
Brand loyalty
Trust and confidence in the product
International Pricing
• Pricing is complex in international business, due
to multiple currencies, trade barriers, added
costs, and typically longer distribution channels.
• Prices affect sales and profits. An inverse
relationship often exists between profits and
market share.
• Firms face pressure to lower prices abroad,
mainly due to lower income levels.
• Conversely, prices can
escalate due to tariffs, taxes,
transportation, intermediary
markups, and after-sales service.
₤ $¥
€
Factors That Affect International
Pricing
• Nature of the market: Local purchasing power
and distribution infrastructure are important
factors.
• Nature of the product or industry: A
specialized or highly advanced product, or an
industry with few competitors, may necessitate
charging a higher price.
• Type of distribution system: Channels are
complex in some countries, which pushes
prices up.
• Location of the production facility: Locating
manufacturing near customers or in countries
with low-cost labor facilitates lower prices.
International Advertising
• Firms conduct advertising via media, which
includes direct mail, radio, television, cinema,
billboards, transit, print media, and the Internet.
• Advertising spending on major media amounted to
$100 billion in both Western Europe and Asia.
• In the United States, advertising expenditures
totaled over $160 billion.
• Advertising is influenced by local factors, such as
availability of media, literacy, regulations, culture,
and local customs, as well as the goals of the firm.
Media Characteristics in Selected Countries
International Human Resource
Management
“The planning, selection,
training,employment and evaluation
of employees for international
operations.”
(Cavusgil et al, 2007:548)
How a firm recruits, trains, and places skilled
personnel in its worldwide value chains sets
it apart from its competition.
Challenges of International
Human Resource Management
•
Recruiting, managing, and retaining human resources
at a firm with extensive global operations is especially
challenging.
•
For example, German firm Siemens has more than
400,000 employees in some 190 countries: 230,000
throughout Europe, 90,000 in the Americas, 70,000
in the Asia-Pacific region, and 12,000 in Africa, the
Middle East, and Russia.
•
Volkswagen, Nestle, IBM, Unilever, Wal-mart,
McDonald’s, and Matsushita each has more than
150,000 employees outside the firm’s home country.
Three Employee Categories
Host
Country
Nationals
(HNCs)
Parent
Country
Nationals
(PCNs)
Third
Country
Nationals
(TCNs)
Complexity of IHRM
The need for a broader
perspective
Greater involvement in
employees lives
New HR
Responsibilities
Complexity
External influences
Managing diversity
Greater risk exposure
Differences Between
Domestic and International IHRM
1. New HR responsibilities, such as international
taxation, international relocation and orientation,
services for expatriates, host government relations,
and language translation services
2. Need for a broader perspective, such as establishing
fair, comparable compensation, when there is a mix of
PCNs, HCNs, and TCNs
3. Greater involvement in employees’ personal lives,
such as housing arrangements, health care, children’s
education, safety, security, appropriate compensation,
and higher living costs
Differences Between
Domestic and International IHRM
4. Managing the mix of expatriates versus locals.
Each location may be staffed with a mix of HCNs,
PCNs, and TCNs, depending on firm’s international
experience, cost of living abroad, local laws, and
availability of qualified local staff.
5. Greater risk exposure, such as political risk and
terrorism
6. External influences of government and culture,
such as taxes, local work regulations, traditional work
practices, and cultural conditions
Key Tasks of IHRM
1. International staffing policy: Activities directed at
recruiting, selecting, and placing employees
2. Preparation and training of international
employees
3. International performance appraisal: Providing
feedback for employees’ professional development
4. Compensation of employees: Includes formulation
of benefit packages that vary greatly from country to
country
5. International labor relations: Managing
relationships with unions; collective bargaining
processes, known as industrial relations
6. Diversity in the international workforce
Knowledgecast Summary
• Communicate an in-depth understanding of the
complexity of the environment and its applications on
decision-making process
• Huge complexity in managing diverse human resource
• Assess current developments in the organisational
environment and alternative responses related to
strategy
Seminar
Review of Article
M. Ayhan Kose and Eswar S. Prasad (2010), Emerging Markets Come
of Age, Finance and Development Journal, 2010
Prepare to review this article in your seminar for this unit. You should
make written notes to bring to the seminar to support your
contributions.
Guide Questions.
a. What are the key changing drivers of global growth?
b. Are emerging economies really in control of their destiny? WHY?
c. What are the factors responsible for the relative resilience of
emerging economies during the global recession?
Group Activity
Environmental Audit – Preparation
Assignment Preparation – Research
• You have an opportunity to use this time to continue to
gather information regarding the environmental audit of your
case study organisation, which will be invaluable in
preparing you for the first assignment.
Assignment Preparation – Rehearsal
• You should also use this opportunity to rehearse your
presentation of finding from the environmental analysis of
your case organisation.
• Remember to have several practice sessions and reflect on
your individual and group performance.