Unit VI Case Study

DBA 8710, International Business and Global Strategy 1

Course Learning Outcomes for Unit VI Upon completion of this unit, students should be able to:

6. Discriminate between strategies applicable to international business operations. 6.1 Explain the importance of global branding and global marketing.

Course/Unit Learning Outcomes

Learning Activity

6.1 Unit Lesson Chapter 18, pp. 529–562 Unit VI Case Study

Required Unit Resources Chapter 18: Global Marketing and Business Analytics, pp. 529–562

Unit Lesson When it comes to strategies that are applicable to international business operations, there are many components that are involved. In this lesson, we will go over global business markets, segmentation, focus, and attributes. We will start by looking at strategies of distribution and communication. Global business always requires partnership, and that includes effective international communication. International partnerships involve at least two people, organizations, or corporations that are working together in the pursuit of shared goals. International partnerships may include corporate partnership and organizational partnership. In these partnerships, mangers and leaders must prepare meetings, conduct meetings, discuss and negotiate, make decisions in groups or smaller meetings, decide where to hold meetings, determine who is to speak first and last, determine sitting arrangements, and conduct virtual meetings. Understanding cultural differences is the first step, but leaders and managers should be engaged in a learning process to develop and grow in international cultural competence. The key to successful partnerships is for managers or leaders working in a global context to advance in cultural intelligence and international cultural competence. So, what does self-assurance look like?

Self-Assurance

Energetic

Self-confident

Comfortable in uncomfortable situations

Witty in tough situations

Along with the aforementioned characteristics, there are also cultural barriers. When attempting to understand cultural differences, there is also the confluence of messages across cultures. While being energetic is helpful, cross-cultural literacy is essential to handling international business operations. A part of understanding cross-cultural literacy is understanding the role of distribution. The largest component involves creating the strategy for how your product will be delivered to the customer. If you cannot do that, you are not staying in business! Most companies know what their wholesale and retail distribution system will consist of,

UNIT VI STUDY GUIDE

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but this is just the beginning. There are four different distribution systems: retail concentration, channel length, channel exclusivity, and channel quality. Retail connection has two major components, which involve how concentrated or fragmented the retail market is (Hill, 2021). An example of a concentrated market would be a large city with many people but just a handful of retail companies that supply the entire city. An example of a fragmented market would be a large city with hundreds or even thousands of retailers and many marketplaces with no one company controlling any market share. In most cases, yet not all, concentrated markets are more common in advanced nations, and fragmented markets are more common in developing nations. As a company develops its strategy, it will have a strong grasp of retail connection. Channel length works in a similar fashion, but factors such as connection must be considered. If there is a short channel length, it means there is less involved between the production of a product and when the product is available to the consumer. A longer channel typically requires the involvement of more departments, or there are more barriers in the production stage. If there are multiple players involved, the channel length will be longer, and it means you are most likely dealing with a more advanced nation. Yet, companies like Walmart have shortened this channel length, which became a hallmark of their business operation success. Some nations are just easier to work with than others. That is what companies would say if they could make that statement without repercussions. The ease of selling goods and services is channel exclusivity. If you want to sell shampoo in Germany, you cannot simply make a deal with a supermarket, and then it just happens. There are regulations, restrictions, and bottle labeling, and that is just the beginning. You must also consider channel quality, which requires being familiar with the company you plan to do business with and their ability to sell your product. Again, just throwing out the shampoo on the beauty aisle in Germany is not going to sell it. You need a high-quality channel—a channel that is able to sell a product with some level of sophistication and knowledge of what you are selling and to whom you are selling. Otherwise, you will be using a poor channel quality and will have to insert your own resources to hopefully sell your shampoo. Now that we have examined strategies of distribution and communication, let’s dig into global business markets for operations. As we have discussed in the course, cultures of many countries create their own norms of what is wanted and desired. This also needs to be understood and examined in the realm of consumer wants and the purchasing power of consumers. For example, it does not make sense to sell a high- end product in an area where most inhabitants are poor. You need to look at the segmentation strategies for your international business operation. This would include income, education, lifestyle, values, social standing, age, gender, and personality (Hill, 2021). Just because the inhabitants in well-to-do areas of India can afford a Tesla does not mean that Tesla is going to do well. You need to optimize the overall fit by determining buyer behavior in the desired marketplace. For example, earlier in the course, we discussed how cultures can and do change over time, which affects the cultural acceptance of products. For example, 15 years ago, a green energy like Tesla would have struggled selling its cars in China. First, the country itself had an incredibly limited intermarket segment, meaning that its borders truly represented a division between different cultures. Today, the intermarket segment has changed, especially between China and Hong Kong. With a massive shift in lifestyle and income changes in China, there is now a real demand for electric cars in the country; considering the impact of pollution as well. These changes have transformed consumer behavior, and the wants and needs of consumers in the segment are different than they were 15 years ago. By understanding its position and strategies, Tesla has dealerships and a significant part of its overall sales in China by following an international business operation based on market segmentation. You cannot discuss strategies for international business without talking about price. Pricing involves more than just slapping a number on a product and hoping for the best. There is a tremendous amount of strategy that takes place in order to generate the maximum return for the company, distributor, and the consumer! No price can be set until you understand that prices around the world will not be the same. An excellent example of this is called the Big Mac index (“The Big Mac index,” 2020). The index, which was developed in 1986, was started for fun and is now a globally accepted analysis to see if some currencies have the Big Mac at an overvalued or undervalued purchasing position for the consumer. For our analysis, you can see this has an excellent viewpoint on price discrimination and the elasticity of a product. For example, if consumers in a poor country want to buy a Big Mac, they are going to be very price conscious, so only small price changes would

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be recommended; however, in another country where the consumers are more inelastic, meaning the consumers make more money and may not be deterred by a price jump in a Big Mac, the product will still sell. There are a lot of other pricing strategies that can be seen through the lens of the Big Mac index. While predatory pricing is illegal in most countries, it still exists. Imagine if the price of a Big Mac in Malaysia went from its price of 8.85 ringgit to just 2 ringgits (“The Big Mac Index,” 20020). How many people would buy a Big Mac? They would nearly run out! Not only that, but they would run many other businesses out of business. You take the loss for six months, drive other companies out of business, and then increase prices after the other businesses have exited the market. The same could be said for multipoint pricing strategies. Consider competitors fighting for the top space in fast food. This type of competition can be seen in many industries, especially in first-world nations. Again, these companies will compete and potentially lose money. While this is good for the consumer, it eventually will go away. An excellent example of this can be seen with the online content battles. With Disney Plus now providing content and doing so at a significantly cheaper rate than Amazon Prime and Netflix, the winner right now is the consumer; however, if there are mergers or the competition wants to get more consumers, you will see an increase in price and, once again, the winners will go back to having the right strategy by international companies. As you configure the strategies of pricing, segmentation, distribution, and communication, it is easy to see that you have to choose the right strategy that is applicable to international business operations.

References Hill, C. W. L. (2021). International business: Competing in the global marketplace (13th ed.). McGraw-Hill

Education. The Big Mac index. (2020, January 15). The Economist. https://www.economist.com/news/2019/07/10/the-

big-mac-index

Suggested Unit Resources In order to access the resource below, utilize the CSU Online Library to begin your research. The following article discusses the domestic airline merger phenomenon of the late 1980s and early 1990s. Clougherty, J. A. (2005). The international drivers of domestic airline mergers in twenty nations: Integrating

industrial organization and international business. Managerial & Decision Economics, 27(1), 75–93. https://doi.org/10.1002/mde.1248