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Thursday, December 13, 2007

Paper on International Strategy in Current context

During the last half of the twentieth century, many barriers to international trade fell and a wave of firms began pursuing international strategies to gain a competitive advantage. Strategies are the means by which long-term objectives will be achieved. Business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint venture.
Strategic management enables organizations to recognize and adapt to change more readily; successfully adapting to change is the key to survival and prosperity. Strategic-management concepts provide an objective basis for allocating resources and for reducing internal conflicts that can arise when subjectivity alone is the basis for major decisions.
In the current context there can be two broad kind of international strategies:
1. A global strategy: Treat the world as a single market. It is applied where forces for global integration are strong and force for national responsiveness is weak. For example this is true of consumer electronics market.
2. A multinational strategy
It treats the world as a portfolio of national opportunities. It is applied where forces for global integration are weak and force for national responsiveness is strong. For example this is true of branded packaged goods business for example strategy pursued by Unilever.
Global Strategy
Marketing defines it as:
“A strategy that seeks competitive advantage with strategic moves that are highly interdependent across countries. These moves include most or all of the following: a standardized core product that exploits or creates homogenous tastes or performance requirements, significant participation in all major country markets to build volume, a concentration of value-creating activities such as R&D and manufacturing in a few countries, and a coherent competitive strategy that pits the worldwide capabilities of the business against the competition.”
Multinational or multidomestic strategy
It treats the world as a portfolio of national opportunities. It is applied where forces for global integration are weak and force for national responsiveness is strong.

Critical factors determining strategy are:
Global Strategy Multi Domestic
Industry Structure WorldWide Uniform Huge Differences
Competition Globally Regional
Economies of Scale requirement High Low
Nature of Cost Curve Flat Relatively less flat
Customer needs Homogeneous Heterogeneous
Nature of Customer Global Size Small sized
Regional Culture Little Impact High Impact
Local Responsiveness Low High

Thus Multi-domestic Strategy is suitable for:
* Product customized for each market
* Decentralized control - local decision making
* Effective when large differences exist between countries
* Advantages: product differentiation, local responsiveness, minimized political risk, minimized exchange rate risk
Global Strategy is suitable for:
* Product is the same in all countries.
* Centralized control - little decision-making authority on the local level
* Effective when differences between countries are small
* Advantages: cost, coordinated activities, faster product development

Case of McDonalds
McDonalds is a good example of a company that followed a multidomestic strategy. This strategy resulted in:
1. Local need is taken utmost care. Here the customer of each nation will get according to their needs.
2. More autonomy to the subsidiary
It enables individual subsidiaries of a multinational firm to compete independently in different domestic markets.
3. Act as SBU
Each subsidiary behaves like a strategic business unit that is expected to contribute earnings and growth proportionate to the market opportunity.
4. Innovation from local R&D
For Example McDonald's put in eight years in India before its first restaurant came up in 1996. At that point, the odds were heavily loaded against it. For, it had already decided not to launch its beef-based core product - the hamburger - in India so that it didn't hurt religious sentiments of the Hindus. The company knew that the key to its survival here lay in acceptance by the government and the customer. It meant figuring out the right menu -- substituting mutton for beef, something it has never done in any other market, choosing names like McAloo or Maharaja Mac, adding variations and dishes that don't appear in any other McDonald's chain anywhere in the world. Finally, it meant getting the pricing just right. The Maharaja Mac ensured that McDonald's main offering was competitively priced. No wonder "McDonald's has established itself as the family's favorite quick-service restaurant.
Finally, it meant getting the pricing just right. The Maharaja Mac ensured that McDonald's main offering was competitively priced.
No wonder "McDonald's has established itself as the family's favorite quick-service restaurant," beams Amit Jatia, managing director of Hardcastle Restaurants, the Mumbai Franchisee of McDonald's.

The KFC experience couldn't have been more different. It paid enough attention to its main raw material supplies -- by working with Venkateshwara Hatcheries for the right chicken. It also got its cold chain in place. But then it slipped up by not paying enough attention to the cultural context in which Indians consume food. It offered too few choices -- with less than a dozen items on the menu to start with compared with 35 at McDonald's. Larger proportions of Indians are vegetarians, which meant a smaller market. A smaller menu simply cut out a lot of potential consumers.

(Written By Rahul Jain)


1. WebLink:

2. Attachment: Win India
WebLink: (Think India to win India, Kohli Vanita)
With reports from Pallavi Bhattacharjee & Shuchi Bansal

3. See Annexure- I Overview of Globalization strategy of McDonald
4. R. Kerin, S.Hartley, E.Berkowitz, W. Rudelius: Marketing, eighth edition, McGraw-Hill 2006
5. Kotler, Philip: Marketing Management: nineth edition, Prentice Hall India
6. Schermehorn, J. R. (2005). Organizational Behavior (9th ed.). Hoboken, NJ: Judy Joseph.
7. Pearce, J. and Robinson, R. (2004). Strategic Management: Formulation, Implementation and Control. New York: The McGraw-Hill Companies.

Monday, December 10, 2007


(This essay is contributed by Ms. Nidhi Puri)

Different people perceive quality differently. Some relate it to the cost of the product, some to its brand. Quality in other terms is the way the value of a product would be perceived by the end user, depending on how well the product performs as per ones scale of expectation.
Quality is like a foundation for any company; be it in the manufacturing industry or any other. It’s rightly said by someone that a building can tolerate all adverse conditions if its foundation is strong. In an ideal situation, higher quality would mean zero percentage of defects in any product. But in day to day scenario it can be related to least defects and rejections. It might not sound cost effective to maintain quality standards at each stage in the process of procurement of raw material to the end product, but it does reduce costs. By maintaining quality standards we reduce the rework or alteration that would be required .This would automatically save our direct material, labor and energy costs. Improving quality at each step would help increase the productivity and also efficiency. There are probable chances that this would lead to cost reductions due to decrease in the number of rejections and the discounts that one has to give buyer for short deliveries and defected products.
The wastage of material and energy would also be reduced. There would be less scrap generation, which again adds on to the cost. Therefore it is quite justifiable to say that higher quality goes a long way in reducing costs on a daily basis. Though the reduction in cost at each step might seem trivial, but in totality it increases the efficiency of the firm and helps reduce the expenses.