Products vs Brands: Differentiation

• A brand is a marketing tool used to identify an offering, differentiate it from similar market offerings, and create distinct market value beyond the other attributes of the offering.

Products vs. Brands

• Product: the physical attributes and benefits of an offering, focuses on tangible features such as taste and nutrition.
• Brand: the symbolic attributes and elements, creates differentiation and emotional bond through name, logo, and motto.
• Products are made in a factory, brands are created in the mind.

Brand Image

• Brand Image is how consumers think and feel about a brand.
• Brands shape associations and reflect perceptions, differentiating and enhancing emotional connection.

How Companies Use Brands for Differentiation

• Commodity Trap: when products lose uniqueness and become interchangeable, such as when Coca-Cola's formula could be re-engineered.
• Coca-Cola has avoided commoditization by officially endorsing the “Coke” trademark and making "Coke" synonymous with "Coca-Cola”, avoiding being a raw material.
• Emotional Branding: connects the brand with happiness, nostalgia, and togetherness.
• Cultural Integration: links “Coca-Cola” to global and local traditions, like the Olympics and Christmas.

How Companies Use Brands to Communicate Value

• Observable Attributes: appearance benefit
• Experiential Attributes: short term benefit
• Credence Attributes: long term benefit a.k.a. unobservable
• Brand value depends on the visibility of these attributes.
• Inverse Relationship: as visibility of benefit decreases, brand reliance increases.
• Unobservable benefits make brands critical for value communication.
• Brands can add value by emphasizing unforeseen attributes and highlighting their importance.

Examples of Branding Success

• Michelin is reliable tires
• Papa John's is freshness of ingredients.

Brand Management

• Brand Management: the process of creating and sustaining a distinctive image to create market value.
• Key activities include designing brand attributes, evaluating impact on customer behavior, and assessing contributions to the company bottom line.
• How it Works: identify company offerings, differentiate from competition, and create value beyond products and services.

Brands

• Brands are not products
• Brands differentiate products, convey attributes, and create value.
• Brands are not brand images

Strategy

• Strategy: a high-level long-term plan to generate the greatest profitability and value, achieving success through clear goals, direction, and consistency.
• It is a set of actions that managers take to attain the goals of the firms.

SMART Goals

• Specific: clear and detailed, includes numbers, percentages, frequency, or outcomes
• Measurable: progress can be tracked and evaluated
• Achievable: realistic and attainable within available resources
• Relevant: aligns with the firm's mission
• Time-framed: specifies a clear timeline for achievement

Firms Goals & Value Creation

• Goals are to maximize the value of the firm for its owners and its shareholders.
• Achieved through profitability, measured by Return on Invested Capital (ROI), and profit growth, measured by net profit increase over time (%).
• Firm Profit: Profit per unit x units sold
• Revenue: sales
• Profit: sales - cost

Value Creation

• Value Creation: the difference between production cost (C) and perceived quality (V: willingness to pay).
• Competitive pressure influences the gap between the perceived value (V) and price (P).
• Value creation benefits firms and consumers through profit per unit (P-C) and consumer surplus per unit (V-P).
• Firms increase value through low-cost strategies, reducing costs, and differentiation strategies, enhancing value.

Global Strategy & Expansion

• Expand internationally because of cheap labor and better skills in South East Asia, or to expand size of market for domestic products.
• "Location economies": where to perform each activity
• Caveats involve trade agreements, tariffs, and transportation costs.
• Experience effects mean the more you produce, the more you perfect production.

Cost Pressures

• Cost Pressures: require a firm to try to lower the costs of value creation.
• Pressures intensify in industries producing commodity-type products or when major competitors are based in low-cost locations, persistent excess capacity, and low consumer switching costs.

Pressures for Local Responsiveness

• Pressures for Local Responsiveness exist due to differences in consumer needs, tastes across cultures and nations.
• Economic and political demands by host-country governments, differences in infrastructure and Traditional Practices, and the rise of regionalism.
• Standardization is easiest if laws are in EU and the US.

Choosing a Strategy

• Involves assessing the strength of pressures and conducting cost/benefit analysis and opportunity assessment.

Global Standardization Strategy

• Global Standardization Strategy: firm focuses on increasing profitability and profit growth by reaping the cost reductions
• This is done with minimal pressures for cost reductions and demands for local responsiveness.
• Pursuing a low-cost strategy on a global scale is the goal, with economies of scale and location economies, avoiding customization.

Localization Strategy

• Localization Strategy: increases profitability by customizing the firm's goods and services to provide a good match to tastes and preferences in different national markets
• Used if substantial differences across nations regarding consumer tastes and preferences, and cost pressures are not too intense
• Customizes goods/services to fit tastes in each national market, requires firms to change their strategies and limits cost savings from mass-producing standardized products.

Transnational Strategy

• Transnational Strategy: simultaneously achieve low costs through location economies, economies of scale, and learning effects while also differentiating product offerings across geographic markets.
• Requires accounting for local differences and fostering multidirectional flows of skills between different subsidiaries in the firm's global network of operations.
• Differentiating product to respond to local demands raises costs.
• Can be complex and challenging to achieve

International Strategy

• Trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies.
• Strategy relies on low cost pressures and low pressures for local responsiveness.
• Taking products developed for domestic market and selling them internationally with minimal local customization It's often centralized, the competitive landscape changes over time, and the patent might expire.

Strategy Summary

• Strategy: set of actions managers take to attain the firm's goals
• Consider how to create value?
• Involves trade-offs
• Involves balancing cost reduction and local responsiveness

Value Creation

• Eg. differentiating product to create values for the consumers
• Analysis will shape strategies-specifically, in positioning their products effectively
• Analyse the competitive environment of an industry
• Competitive intensity
• Industry attractiveness and profitability

Porter's 5 Forces

• Profitability Differences motivate you to use them
• Massive profitabitliy differences exist across industries
• Some industries inherently allow firms to capture more value
• This tool helps us not only understand why some industries are more profitable than others.

Industry Definition

• "Industry": competitors producing substitutes that are close enough, the behavior of any firm affects each of the others either directly or indirectly
• Includes: scope of products or services, geographic scope, and government regulations

Substitutes

• Substitutes: meet same need as industry's product, but differently
• Threat of substitutes is high if:
• Relative high value or low price compared to the industry's product
• High similarity to the industry's product
• Improvements in substitute technology make it more appealing
• Low switching costs for buyers

Threat of New Entrants

• Can increase competition and pressure prices and costs
• Threat of entry limits industry profit potential
• Threat of new entrants is high when:
• Economies of scale are low, government restrictions are minimal
• It is costly to produce low amounts
• Not competitive
• Loyalty is weak

Rivalry among existing competitors

• Intense rivalry can reduce prices or increase costs, lowering profits
• Rivalry is strong when:
• Competitors are numerous or similar in size and market position
• Industry growth is slow
• Exit barriers are high
• Rivals are strongly committed to the business

Bargaining Power of Suppliers

• Impacts industry profitability: higher prices raise input costs, and lower quality reduces value offered to buyers.
• Suppliers have High Bargaining Power When:
  • They are more concentrated than buyers
  • They don't depend heavily on industry revenue.
  • There are high switching costs for buyers
• Suppliers offer highly differentiated products
• No substitutes for supplier offerings
• Suppliers can threaten forward integration

Bargaining Power of Buyers

• Buyer power impacts industry profitability
• Lower prices: reduces revenue
• Higher quality demands: Increases production costs
• Buyers have big bargaining power when:
• Buyers are few or purchase in large volumes
• Buyers face low switching costs
• Buyers can threaten backward integration
• Negligible impact on performance or cost savings

Industry Analysis Steps

1. Define industry + what belongs to it?
2. Identify participants - buyers, suppliers, substitutes, potential entrants and competitors
3. Assess underlying drivers of each competitive force - strong and weak forces and why?
4. Determine overall industry structure - forces controlled for profitability current level

Pitfalls in Industry Analysis

• Common Pitfalls in Industry Analysis include defining the industry too broadly or narrowly, making lists instead of conducting rigorous analysis, and paying equal attention to all forces.

Summary

1. Framework for analysing industry profitability
2. To guide strategy!
3. Forces fall into 3 natural groups:

• Influence value distribution
• Strengthen or weaken other forces

Motivation: Within-Industry Profitability Variation

• Profitability varies greatly within industries
• Profitability vs negative profits

Strategic Positioning

• Involves deliberate choices: who to target and how to balance value creation and low cost
• Efficiency frontier: shows trade-off between cost and value

Competitive Advantage

• Edge that allows a firm to capture more value compared to its competitors by either reducing costs or creating and capturing value.
• Occurs when a firm drives a wider wedge between Willingness to Pay and cost compared to its rivals
• Market scope: narrow vs broad segments
• Who does the business serve
• Focus strategy narrows down competitive scope within an industry

Types of Focus

• Cost focus: achieving cost advantage in a specific segment
• Differentiation focus: offering unique products for specific needs

Strategic Positioning/ Porter's Generic Strategies

• Competitive Advantage
• Lower Cost
  • Cost Leadership
  • Cost Focus: NARROW SCOPE
• Differentiation
• Differentiation- BROAD SCOPE
• Differentiation Focus- NARROW SCOPE

Strategic Positioning

• Defines competitive scope (who to target) and competitive advantage (how to compete).
• Firms must balance value and cost efficiently and trade-offs are essential to differentiate.
• Operations must align with the chosen positioning

Value and Costs

• Product Features & Customer Service are value drivers
• Economies of Scale & Learning curve effects are cost drivers

Sustaining Competitive Advantage

• Increasing Consumer Retention: using Proprietary Supercharger network. and seamlessly integrating the hardware/software
• Prevent Imitation: scaling is costly, battery patents + hard to match.

Globalization

• Shift toward a more integrated and interdependent world economy through globalization of markets and production.
• Globalization of Markets: merging historically distinct national markets into a huge global marketplace
• Firms must promote this trend by offering the same basic products worldwide

Globalization of Production

• Sourcing of goods and services taking advantage of lower costs and quality.
• Services are also increasing in speed.
• Hard to achieve full globalisation but things like Nutella are examples.

Global Institutions

• Institutions help manage, regulate, and police the global marketplace by establishing international treaties.
• Examples are: General agreement on Tariffs and Trade, World Trade Organisation, International Monetary Fund, World Bank and United Nations
• All formed through voluntary agreements roles are defined in international treaties
• Lower import costs causes GDP to double

Drivers of Globalization

• Drivers of Globalization: declining trade and investment barriers, technological change (lower costs of processing + transportation tech) and progressive reduction of trade

Implications of Containers

• Standardize them
• Create and manage a dispersed production system
• Do not underestimate the costs
• Foreign Direct Investment- money flow
• Business w/ productive activities in 2 or more countries (rise of non American and mini multinationals)
• Democratization + liberalization of China = free markets

Globalisation: Debate

• Criticisms of Globalization: The critics believe it cuts jobs, the supporters believe it benefits everyone.
• Stricter regulations in developed nations increase costs

National Differences

• Countries differ, making international business complicated.

Political Systems

• Government in a nation
• Assessed according to 2 dimensions
• Collectivism leans toward totalitarianism while individualism leans toward democracy.

Collectivism and Individualism

• Emphasis on collective goals over individual goals
• Philisophical roots: Plato
• Associated w/ natioons that hav embrace socialism

Individualism

• Direct opposide of Collectivism
• Center Prinipal: individual economic and political freedoms

Democracy

• Government by the people, through elected representatives + constitutional law

Totalitarianism

• Socialism achieved through dictatorship
• Includes religion, tribal, and right-wing variants

Economic Systems

• Market economy: privately owned production determined by supply and demand
• Command economy: government plans production
• Mixed economy: Combination of the two

Legal system

• Complusive
• Process through which laws are enforced
• Solutions or remedies + complaints
• Shape + revailing political systems
• Common all: Evolved + based in tradition, precedent + custom
• Civil law: Based on details organized into codes
• Theocratic Law: law

Property Rights and Corruption

• Property = a resource that an individual or business owns

Violating Rights

• Private or public Action
• Protect IP by protecting a safe product which can lead to criminal and civil law
• Can result in attractiveness of business

Economic Development

• The process by which economic wellbeing and quality goes up.
• Measured by: - GDP ( total monetary goods in specific pd of time)
• GNP ( total annual rec by reisdents of nation)
• Purchase power Party
• Content basqet
• Informal economy- Black economy
• PPP GDP: Metric to GDP

Human Development Index

• UN measure using a number of factors
• Life expectancy at birth
• Educational attainment
• Assessing with averages

Political Economy and Economic Progress

• Innovation: New processes, org management
• Requires market economy (strong right)

Spread of Market- Based Sustems

• Economics Drivers
• Economic freedom
• Driver (fall of USSR and com regimes.

Economic Systems

• rights regime predictors of economic opportunities but
• Deregulation/ Privitations

Ideological

• Less prevailing today- western more widespread
• Potential for Business
• Will democracy thrive in bad times + China stable
• Size of Economic
• Likely economics Growth

Introduction to Feb3

• Adopting Local culture
• awareness of different influence in business

Define

Culture- Value and Normas ( shared group and TOG gives design for living Society- groups who share these

Value and Norms

• Value ideas
• Norms are social rules ( Folk swags ( good manors) / Mores (laws like theft and norms)

Culture and Businesses

• 116 IBM - work values
• Power Distance + Uncertainty + Individualism vs Femininity + Long term vs Short term

Cultural Change

• Need to Develop Literacy
• Connect between culture competive Ad value

Ethics

CSR is key + internal business

• Ethics = principle
• Ethical State - Dont Validate business

Ethics vs Busines

• Social and Environment are impacted

Preventative Abuses of Buisnesses + Ethics

• Should Set standard/ inspect foreign
• Need basic hr
• basic hr not accepted: freedom of speech + Repressive regimes - ETHICAL TO BUSINESS
• NO = lose money . Yes + impose Hr
• Can Drive investment + change - Regimes to justify engagement
• Polliution + ENV= Issues rise when enviro diff

Tradegy Comons

• Resource ovverude
• Law Enforced to prove overside
• 0 Move is bad
• Can a compmove to void rules

Trade off if they Corrupt

• COR is a global Issue - The U.S. and Foreign Corrupt Buisness act
• (Makes bribary illegle) - Moral ob of MNC

Origin of Behaivoor

• Organisational
• Personal
• Societal
• Leadership
• Goals
• Decision Making

###Friedman

• Use Resource to increase to be safe

###Culture

• Ethica is religion - do as other

###Rightrous Moralist

• Home country standard
• Developed countires + can be too forward
• What is illegal + what is not accepted : questions to be asked

Ethics Perspectives

• Naive Moralist ( common but not justified)
• Ethics are a need+ improving
• Utilitism ( Moral > Cons)

Rights THeoiries

• Humans have rights beyond border

Justice theoiries

• Foocus on econ services/ goods

Meracanilisam 10.2

• Alawys take that we buy more , make money

Trade suplus

• Expoect / impor
• Advocatment for intervention
• Abzole value
• No trade

Production Possibiity Frontier

• What to Poduce/ Consume
• Consume > Compeition

Trade off

• Adam smith
• Countries Specialize
• They have Abzole adventrade

Comparative adventage

• Davide Re cardo
• Trade efficient buy good

Qual and assuptions

• Simple world
• No Transportation

Licardiam model extend

• Immobile
• Hard To move
• Hekchler Theory ( countres export that will make intensive the local abudant

Product Life Cycle

• Weath markets (U.S.) = incentive
• U.S> Labor = more costs

New Trade Trade

• Inreased variety > trade better
• 1 ST over adventrades

POrter Diamond

• Endow
• Demand + Firm strati + industry

10 internation trades

• Intervere w/ out citizens
• Notionall support trade free + Group the best in the world.

10 trades

• Taxes + Inports
• Specific Taxes
• Ad volun

Tarffies/ Bans

• Taz on EXPORTS + LIMIT ExPORTS

Subdies

• Gov PAymens
• Falsly helkp companies from import prices

Oustas + Import Prices

• Limit by limiting supplies
• Vep = Quota on Exports
• Import to import

Local Content

• Need to b good + produce lots
• Expreesed (Physical OR value )

Duimping

• Sell good ABROAD Cheep to unload

Cas eOf GV intervtion

• Aruments Political
• Protect jobs/ industries and Nat secuirties + Cons / Forign/ Humen rights.

EconArgu

• Infant Industrt argument

Strategy trade Plolix

• Gov Support Frms + in duderst ( economies )

World Trading System

• BUT how does it rate barrier remmoca;?
• who Enfreces RUI
• Needed are refrries

THE ORGANIZATION OF INTERNATIONAL BUSINESS

• Orgazitation alarchiture = Ofirms Org Elements are consistent
• Strategy, archi + Enviro are CONSISTENT

Org Structure

• Vertical DIff = at top pyramids Arguements =
• Consist / improve aline w goal
• Give top manager means to bring

Arg - Focaus for top + motivation

• Giver flex Awarw culture
• INCREASE
• GObal Stratif = centraiized firm strategy goal + Decent Production

HOrzitonall Differ

• How firms devide into aub Units
• Do estic firms :function stratic

Buisnsess or org + Func stuctures

• Each dept = 1 struc - Worls

Ineranation Division

• Group All intrnaitail under 1 area
• Dup structures can Conflict

- Org architue

• Local
• Area

The org Architue Choces are Interagion control

• Prossess Culture
• Imlementing in Org

Global Production and Supply Chian

• The Value Chain Series
• vc : of Distinice Values

VChans

• Prosuctin inc activities . +Supply Chain= integartion of logisys and purhasesing
• Upstream suuply chain; production farcity End Su

Startee

• Min transport Cost W/ mainstaning Custermers.
• Time com

Countrt Factors

• Policts factors cost

Tachnical Factors +

Value = Weigh

High - Make - BY de sicons =

Global Lorg

Logsicis :

• part suppp chain contors inv
• Cor active

###What IS distro Centre

• Stote process costize

Global Inv

• IN time VS cases

• Balance Bulk produc - Transportaion

• Glovl purh

Level1 = purchas

3- random 4- global is coordinated

• 5 : fully

Where do PRODUCE

• Tech Product
• Supply chains = DC inv