Globalization and Local Adaptation PDF

Globalization and local adaptation International Business and International Management Table of content Globalization Internationalization a internationalization theories Local adaptation 80s Levitt Theodor: The Globalization of Markets Globalization 1. MNC have global reach and i...

Globalization and local adaptation International Business and International Management Table of content Globalization Internationalization a internationalization theories Local adaptation 80s Levitt Theodor: The Globalization of Markets Globalization 1. MNC have global reach and increasing power. 2. Travel and shipping are cheap and safe. (It took 2 months to cross Atlantic in 1800, today it takes 5 hours by plane and less than a week by ship) 3. Governments have decreased tariffs and regulations on international trade (free trade). Globalization GLOBAL = worldwide is a process of interaction and integration among the people, companies, and governments of different nations wide spread economic interdependence politics – economy – culture (society) – ecology – trade – communication Globalization Reflects the trend of firms buying, developing producing and selling products and services in most countries and regions of the world Refers to the shift toward a more integrated and interdependent world economy The globalization of markets and the globalization of production Globalization of markets Refers to the merging of historically distinct and separate national market into one huge global marketplace. Falling barriers to cross-border trade have made it easier to sell internationally. Global consumers = global market In many global markets, the same firms frequently confront each other as competitors in nation after nation. Coca-Cola vs. PepsiCO, Boening vs. Airbus, Sony vs. Nintendo vs. Microsoft Globalization of production Refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (labor, energy, land, capital) WHO MAKES the Boeing's 777? WHO MAKES the Apple iPhone? Globalization of production WHO MAKES the Boeing's 777? 8 Japanese suppliers make parts for the fuselage, door, and wings, 1 supplier in Singapore makes the doors for the nose landing gear 3 suppliers in Italy manufacture wing flaps and so on... In total – 30% of Boeing, by value, is built by foreign companies. Price of Boening 777 = 258 – 316 Million USD Globalization of production Refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (labor, energy, land, capital) WHO MAKES the Boeing's 777? WHO MAKES the Apple iPhone? Globalization of production WHO MAKES the Apple iPhone? Case study – team work Globalization Pros and cons of globalization Globalization – pros Free trade, new jobs, companies are more competitive, Lower prices for customers Sharing technology, development of technologies, R&D Easier travelling, mass communication Easy to sell and buy products and services Influx of information between counties Globalization – cons Rich versus poor people (social polarization) Multinational corporations are accused of social injustice, unfair working conditions (including slave labor wages, living and working conditions) The biggest problem for developed countries is that jobs are lost and transferred to lower cost countries. Terrorism and data protection Ecological disasters Globalization The role of technological change microprocessors and telecommunications the internet (the internet of things) transportation technology Critical thinking and discussion 1. How have changes in technology contributed to the globalization of markets and production? Would the globalization of production and markets have been possible without these technological changes? 2. How does Internet affect international business activity and the globalization of the world economy? Internationalization Doing business in many countries of the world, but often limited to a certain region (e.g. Europe) International business – any company that engages in international trade or investment Differences between a purely domestic business and international business? Internationalization Should the company „stay at home“ or „go abroad“? Solberg discusses the conditions under which the company should „stay at home“ or „build a global position“ as two extremes. Should the company „stay at home“ or „go abroad“? Should the company „stay at home“ or „go abroad“? How Walmart has become global?  Should the company „stay at home“ or „go abroad“? Identify strategic steps of Walmart that helped built global business. What kind of the entry modes Walmart used and why? What do you think about Walmart's decision to focus on Asian market? Internationalization Barriers hindering internationalization initiation Insufficient finances Insufficient knowledge Lack of foreign market connections Lack of capital to finance expansion into foreign markets Lack of productivity capacity to dedicate to foreign markets Lack of foreign channels of distribution Internationalization theories Historical development of internationalization The Uppsala internationalization model Stopford´s model of internationalization Dunning´s eclectic approach Internationalization theories The Uppsala internationalization model Additional market commitments are made in small incremental step: choosing additional geographic markets with small distances, combined with choosing entry modes with few additional risks. Johanson and Widersheim-Paul define 4 different modes of entering an international market, where the successive stages represent higher degrees of international market commitment. Internationalization theories The Uppsala internationalization model Stage 1: no regular export activities (sporadic export) Stage 2: export via independent representatives (export modes) Stage 3: establishment of a foreign sales subsidiary Stage 4: foreign production/manufacturing units Internationalization theories Stopford´s model of internationalization Companies entering foreign markets gradually – first analysis the advantages and potential of foreign market through export activities, next step - establishment of manufacturing branch in the host country. The final stage is owned subsidiaries abroad. HOW TO BUILD A GLOBAL BUSSINESS Successful story HOW TO BUILD A GLOBAL BUSINESS Success story ESET ESET is an IT security company developing leading-edge security solutions against cyber threats.  ESET IN SLOVAKIA Headquaters: Bratislava  ESET ABROAD Branches: San Diego (USA, California), Prague (ČR), Buenos Aires (Argentina), Singapur, Jena (Germany), Sydney (Australia) Research centers: Krakov (PL), Montreal (Kanada), Moskva (Rusko) HISTORY the beginnging in 1987 one of the first PC virus „Vienna“ (M. Trnka + P. Paško) Later NOD 32 – one of the most famous and most used antivirus sw provide security software in over 200 countries and territories worldwide, and its software is localized into more than 30 languages. ESET and Talents Talented and high qualified employees Campaign Join ESET Corporate identity is built on fairness, honesty and kindness „Intelligent people develop intelligent products for intelligent clients.“ Competitors of Eset worldwide Strategic years 2002, 2006: „IT company of the year“ in Slovakia „Fast 50 CE“ a „Fast 500 EMEA“ (Deloitte) 2008, 2009, 2010, 2016 – TREND magazine „Company of the year “ 2012-2015: One of the top 10 employers of the year in Slovakia 2012: half billion people all around the world recognize the brand ESET 2014: San Diego, Slovak American Innovation Centre  ESET TODAY Richard Marko „Slovak CEO 2015“ (Forbes) Company revenue: €526 million 22 branches worlwide (2019 – Italy, Milan) Critical thinking and discussion 1. What kind of famous global products is possible buy in your home country? 2. Prepare a list of companies from your home country which run their business worldwide. 3. How does Internet affect international business activity and the globalization of the world economy? Global vs. Local Global advertising Local advertising Local advertising Local adaptation Final modification of products and services according to local customs and traditions in all areas – from product design and quality to customer services and advertising Local adaptation A great opportunity to profit progression Is caused by the special requirements of individual regions and country markets and the requirements of local know-how It means adapting products, advertisements, packaging, communication according cultures, customs, traditions, historical and geographical conditions and so on. Coca-Cola Company Adaptation for Brazilian market: Drink from Guarana Heineken Adaptation of an advertising Brand Zlatý bažant Glocal strategy Think GLOBAL , act LOCAL. Take advantages of globalization (standardization) and localization (differentiation) GLOBAL _ LOCAL _ GLOCAL Strategy Core idea GLOBAL Thinking globally, acting globally Globalism LOCAL Thinking locally, acting locally Localism GLOCAL Thinking globally, acting locally Integrating both – localism and globalism Framework for Alternative Global Marketing Strategy Core idea Globalization The tendency toward an international integration of goods, technology, information, labor, capital, or the process of making this integration Localization The process of adapting a product and service to a particular culture, language, developing a local appeal and satisfying local needs Glocalization Providing global offer (brand, idea, product, service) while taking local related issues into account Framework for Alternative Global Marketing Communication strategy Standardized Localized Communication Communication Product strategy Global product Global strategy Glocal strategy (standardized product) (standard product + standard (standard product + customized promotion) promotion) Coca-Cola drink Redbull in China Local adapted product Glocal strategy Local strategy (localized product) (customized product + (customized product + standard promotion) customized promotion) McDonald´s menu Kuat drink by Coca Cola CO. worldwide McDonalds – adapted produts worldwide Adaptation for India, Mexico, Middle East, Italy Chaddilac – adapted cars Adaptation for China Coca-Cola Co. – adapted drinks Adaptation for Japan Learning case Local adapted products all around the world Nestlé Company Product portfolio – more than 8000 brands Adaptation for Japanese market: Nestlé Company Nestlé Company Adaptation for Brazilian market Weight of BONO cookies – from 200 g to 149 g Nestlé Company Adaptation for Brazilian market In the year when they reduce a weight of Bono cookies – the company recorded 40% increase in sales Redbull Adaptation for Chinese market Be global, think/act local strategy Czech security software company – 1988 (Eduard Kučera – Pavel Baudiš) Avast Free Antivirus – freemium model of pricing more than 180 billion active users online Freemium model The word freemium is a combination of the words free and premium. It describes a business model in which you give a core product away for free to a large group of users and sell premium products to a smaller fraction of this user base. This model is very common in online services and digital products Levels of AVAST online product - (free antivirus – internet security – premier) Word-of-mouth Verbal reference The way of oral communication from person to person Personal recommendation, unpaid advertising spreading the word among existing and potential customers Think Local – steps of AVAST – Brazil 1. Language adaptation 2. Using local currency 3. The method and form of payment Think Local – steps of AVAST – Brazil 1. Language adaptation (instead of English – Portuguese) 2. Using local currency (instead American dollar – Brazil real) 3. The method and form of payment instead one-time purchase – on installments instead payment by creditt card – payment in cash (BOLETO BANCARIO – payment is realized by bank) Think Local – steps of AVAST – Brazil Results: Conversion rate increased from 1% to 3% on the Brazilian market Advantages of glocal strategy May be a strategic advantage for developing a key position in the foreign markets brings additional positive effects: building positive relationships with local customers creating a good and stable position, not only for product brands, but also the company profitable progression P. Kottler about glocal marketing Consumers feel that the brand is relevant to them and is tailored to their needs and wants. There is a harmony and balance between the different levels of marketing activity: strategic, tactical and operative. Brands gain greater market share. International Business Strategies Multidomestic: Low Integration and High Responsiveness Global: High Integration and Low Responsiveness Transnational: High Integration and High Responsiveness International: Low Integration and Low Responsiveness Let´s move to Assignment NO.1 Assignment NO. 1 Teamwork (3 students maximum) – Topic: Local adaptation of international company Structure: 1. Short introduction of company, 2. Select examples of local adaptation: products or services. 3. How, where and why were local adapted? 4. What kind of effects/impact it made? Submit A1 via MS Teams (one submission per team) Presentation day: 17.10.2023