Free Essay

Covergence and Divergence

In: Business and Management

Submitted By William123
Words 857
Pages 4
1. The authors describe a four-phase process for global expansion. What are the four phases? * In the initial entry phase, firms must establish a foothold in different foreign markets. Country markets of interest are identified as bases for future expansion. Strategic decisions are then made regarding how and when to enter the specific markets. Efforts to maximize international economies of scale are evaluated, paying particular attention to production, advertising and branding. * Through efforts with local market expansion, firms promote sales from each country-specific base. New products and services are developed, or existing products and services are tailored to meet the customer demands of each country market. In doing so, firms strive to achieve economies of scope by spreading shared costs across multiple product and service lines. * Global rationalization induces worldwide economies of scale, shifting the trend away from country-centric strategies. This increase in efficiency stimulates a higher quality of R&D, operations, engineering, and even management techniques; synergies are realized by this new organization of operations. * Semi global Marketing Strategy allows for the simultaneous focus of managing multiple strategies in multiple country markets. During this step it is imperative that firms maintain their competitive position and market share in developed markets, while concurrently establishing a presence in divergent emerging markets.

2. What are some peculiar challenges for entering Phase 4? Greater geographic dispersion across country borders increases the costs of coordination between units and the distribution of products. Trade barriers, logistical costs, cultural and economic diversity differences between countries greatly complicate the implementation of a global expansion strategy. Such complications may result in diseconomies, and unfavorable consequences regarding the firm’s profit. Globalization has introduced a dramatic change in the frequency, context and means in which people from different cultural backgrounds interact. Global expansion strategies must consider diverse sources of market growth and opportunity, specific to each country market. Cross cultural differences may manifest in areas such as customer demands, the nature of competition, and the market infrastructure in emerging markets. Firms must develop a more complex, multifaceted approach to designing different strategies for a broad array of diverse and rapidly growing markets. This requires a local focus with greater reliance on local talent. 3. In what ways is it more challenging to market to developed countries (like England) as compared to emerging markets like Chile? Battles for market share in developed countries has culminated from increased growth, market saturation, and decreased demand for products and services. This is further compounded by slow or negative economic growth and high rates of unemployment due to the decline of the industrial sector, high levels of consumer debt, and aging populations. Intense competition and market segmentation has led to increased costs for firm’s Marketing and R&D divisions; limiting economies of scale. Numerous firms have identified emerging countries as ideal investment markets; international expansion into these countries has the potential to allow firms to enjoy the advantages of high growth rates in terms of population and GDP per capita. Companies from large emerging market countries such as China, India, and Brazil are becoming key competitors in the world market; their firms are able to leverage the advantages of the home country’s low resource and labor costs. Firms from developed countries must respond with strategies that move their operations into the home markets of these firms in an effort to take advantage of their opposition’s competitive advantages. 4. What are some differences between the various strategies described in the article? * Developed markets – focuses on integration and coordination of strategy and implementation across national boundaries * Global and Regional Segments – focuses on integration and coordination of strategy and implementation among consumers with similar tastes and preferences across countries and regions * Country-Centric Elements – focuses on integration and coordination of strategy and implementation by tailoring product and promotional strategies to distinctive country demand patterns and tastes * Rural Markets and Urban Poor – focuses on integration and coordination of strategy and implementation among local markets * Country Clusters – focuses on integration and coordination of strategy and implementation by identifying markets with similar needs / conditions within country clusters

5. Overall lessons learned? As firms expand operations across a much broader geographic base, they are facing an increasingly heterogeneous range of scenarios. Many markets are converging as a result of communications and logistics networks expanding operations on a global scale. Other markets are becoming more complex, with firms encountering significant economic and cultural differences in the geographic areas in which they conduct business operations. The evolutionary trends of convergence and divergence necessitate the rethinking and refocusing of global marketing strategy. It may prove difficult to develop a coherent strategy in international markets given variances in growth rates, market potential, level of competition, ease of market access, and the degree of market interconnectedness. Semi global strategies are thus recommended, as they allow for customized approaches in each specific country market. Often these customized strategies have little in common with one another, and must be managed at the local level in order to be executed successfully. Firms must strive to achieve synergies by combining elements of these strategies into a coherent whole.

Similar Documents

Premium Essay

Corporate Governance

...320 Backman, above n10, 46. Ibid, 46-47. The author quotes the example of Robert Kuok (one of the wealthiest businessmen in Asia) who resigned from his last formal position in his many publicly listed companies – chairman of his Hong Kong-based South China Morning Post (Holding) – at the end of 1997. Despite an empire of hundreds of companies, of which at least 14 are listed on stock exchanges around Asia, no one has any doubts about who calls the shots, particularly on the big decisions pertaining to the conglomerate. Ibid, 46-47. Lee Suet Lin Joyce, above n20, 47. Produced by The Berkeley Electronic Press, 2003 7 Bond Law Review, Vol. 15 [2003], Iss. 1, Art. 13 (2003) 15 BOND LAW REVIEW still makes for a significant divergence between control and cash flow rights of the controlling shareholder.31 Further, Backman states in his book ‘Asian Eclipse – Exposing the Dark Side of Business in Asia’ that ‘such a structure makes it easier for the families to implement the maxim: What is profitable is 100% mine; what is less so can be shared with others’. Here, shares are sold to the public, and proceeds are passed up the pyramid through a myriad of internal transactions. As a result, the asset that is less profitable and less desired by the controlling family is passed down the pyramid.32 In addition, the purpose of the pyramid structure is to draw outside capital into the founding group while at the same time retaining capital within the group.33 Therefore,......

Words: 13068 - Pages: 53