Compare and contrast the different forms that a company’s foreign investments can take.

Discuss the factors that contribute to the successful launch of a global strategic partnership.

Identify some of the challenges associated with partnerships in developing countries.

Describe the special forms of cooperative strategies found in Asia.

Explain the evolution of cooperative strategies in the 21st century.

Use the market expansion strategies matrix to explain the strategies used by the world’s biggest global companies.

9-2

From modest beginnings 45 years ago in Seattle’s Pike Street Market, Starbucks Corporation has become a global marketing phenomenon. Today, Starbucks is the world’s leading specialty coffee retailer, with 2014 revenues of $16.4 billion. Starbucks founder and chairman Howard Schultz and his management team have used a variety of market-entry approaches—direct ownership, licensing, and franchising—to create an empire of more than 21,000 coffee cafés in 65 countries. In addition, Schultz has licensed the Starbucks brand name to marketers of noncoffee products such as ice cream. The company has even made forays into movies and recorded music.

Investment Cost of Marketing Entry Strategies

9-3

The various entry mode options form a continuum. As shown on this slide, the level of involvement, risk, and financial reward increases as a company moves from market entry strategies such as licensing to joint ventures and ultimately, various forms of investment. When a global company seeks to enter a developing country market, there is an additional strategy issue to address: Whether to replicate the strategy that served the company well in developed markets without significant adaptation. To the extent that the objective of entering the market is to achieve penetration, executives at global companies are well advised to consider embracing a mass-market mind-set. This may well mandate an adaptation strategy.

Which Strategy Should Be Used?

It depends on:

Vision

Attitude toward risk

Available investment capital

How much control is desired

9-4

Starbucks plans to have 1,500 stores in China by 2015.

Licensing

A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation

Patent

Trade secret

Brand name

Product formulations

Worldwide sales of licensed goods

totaled $241.5 billion in 2014

9-5

Disney is the world’s top licensor.

Licensing is a contractual arrangement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation. The licensed asset may be a brand name, company name, patent, trade secret, or product formulation.

Some companies use licensing extensively: Apparel designers (Hugo Boss, Bill Blass, Ralph Lauren), Coca-Cola, Disney, Caterpillar, and the National Basketball Association. Licensing agreements allow companies to extend their brands and generate substantial revenue. It can contribute ROI if performance levels are stated in contracts.

There are two key advantages associated with licensing as a market entry mode. First, because the licensee is typically a local business that will produce and market the goods on a local or regional basis, licensing enables companies to circumvent tariffs, quotas, or similar export barriers discussed in Chapter 8. Second, when appropriate, licensees are granted considerable autonomy and are free to adapt the licensed goods to local tastes.

According to the international Licensing Industry Merchandisers Association (LIMA), worldwide sales of licensed goods totaled $241.5 billion in 2014. LIMA also has reported that the United States and Canada account for about 60 percent of licensed goods sales.

Licensing allows Disney to create synergies based on its core theme park, motion picture, and television businesses. Its licensees are allowed considerable leeway to adapt colors, materials, or other design elements to local tastes. In China, licensed goods were practically unknown until a few years ago; by 2001, annual sales of all licensed goods totaled $600 million. Industry observers expect that figure to grow by 10% or more in the next few years.

Advantages to Licensing

Provides additional profitability with little initial investment

Provides method of circumventing tariffs, quotas, and other export barriers

Attractive ROI

Low costs to implement

Licensees have autonomy to adapt products to local tastes

License agreements should have cross-technology agreements to share developments and create competitive advantage for each party

9-6

Licensing is a global market-entry and expansion strategy with considerable appeal. It can offer an attractive return on investment for the life of the agreement, provided that the necessary performance clauses are included in the contract. The only cost is signing the agreement and policing its implementation.

Two key advantages are associated with licensing as a market-entry mode. First, because the licensee is typically a local business that will produce and market the goods on a local or regional basis, licensing enables companies to circumvent tariffs, quotas, or similar export barriers discussed in Chapter 8. Second, when appropriate, licensees are granted considerable autonomy and are free to adapt the licensed goods to local tastes. Perhaps the most famous example of the opportunity costs associated with licensing dates back to the mid-1950s, when Sony co-founder Masaru Ibuka obtained a licensing agreement for the transistor from AT&T’s Bell Laboratories. Ibuka dreamed of using transistors to make small, battery-powered radios. However, the Bell engineers with whom he spoke insisted that it was impossible to manufacture transistors that could handle the high frequencies required for a radio; they advised him to try making hearing aids. Undeterred, Ibuka presented the challenge to his Japanese engineers who spent many months improving high-frequency output. Sony was not the first company to unveil a transistor radio; a U.S.-built product, the Regency, featured transistors from Texas Instruments and a colorful plastic case. However, it was Sony’s high quality, distinctive approach to styling and marketing savvy that ultimately translated into worldwide success.

Disadvantages to Licensing

Limited market control

Returns may be lost

The agreement may be short-lived

Licensee may become competitor

Licensee may exploit company resources

9-7

First, licensing agreements offer limited market control. Because the licensor typically does not become involved in the licensee’s marketing program, potential returns from marketing may be lost. The second disadvantage is that the agreement may have a short life if the licensee develops its own know-how and begins to innovate in the licensed product or technology area. In a worst-case scenario (from the licensor’s point of view), licensees—especially those working with process technologies—can develop into strong competitors in the local market and, eventually, into First, licensing agreements offer limited market control. Because the licensor typically does not become involved in the licensee’s marketing program, potential returns from marketing may be lost. The second disadvantage is that the agreement may have a short life if the licensee develops its own know-how and begins to innovate in the licensed product or technology area. In a worst-case scenario (from the licensor’s point of view), licensees—especially those working with process technologies—can develop into strong competitors in the local market and, eventually, into industry leaders.

Companies may find that the upfront easy money obtained from licensing turns out to be a very expensive source of revenue. To prevent a licensor-competitor from gaining unilateral benefit, licensing agreements should provide for a cross-technology exchange among all parties. At the absolute minimum, any company that plans to remain in business must ensure that its license agreements include a provision for full cross-licensing (i.e., that the licensee shares its developments with the licensor). Overall, the licensing strategy must ensure ongoing competitive advantage. For example, license arrangements can create export market opportunities and open the door to low-risk manufacturing relationships. They can also speed diffusion of new products.

Special Licensing Arrangements

Contract manufacturing

Company provides technical specifications to a subcontractor or local manufacturer

Allows company to specialize in product design while contractors accept responsibility for manufacturing facilities

May open the firm to criticism if manufacturers operate with harsh working conditions or have low wages

Franchising

Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies

Used by the specialty retailing & fast-food industries

9-8

Another advantage of contract manufacturing includes limited commitment of financial and managerial resources and quick entry into target countries, especially when the target market is too small to justify significant investment. One disadvantage, as already noted, is that companies may open themselves to public scrutiny and criticism if workers in contract factories are poorly paid or labor in inhumane circumstances. Timberland and other companies that source in low-wage countries are using image advertising to communicate their corporate policies on sustainable business practices.

Franchising has great appeal to local entrepreneurs anxious to learn and apply Western-style marketing techniques.

The specialty retailing industry favors franchising as a market-entry mode. For example, The Body Shop has more than 2,500 stores in 60 countries; franchisees operate about 90 percent of them. Franchising is also a cornerstone of global growth in the fast-food industry; McDonald’s reliance on franchising to expand globally is a case in point. The fast-food giant has a well-known global brand name and a business system that can be easily replicated in multiple country markets. Crucially, McDonald’s headquarters has learned the wisdom of leveraging local market knowledge by granting franchisees considerable leeway to tailor restaurant interior designs and menu offerings to suit country-specific preferences and tastes.

Franchising Questions

Will local consumers buy your product?

How tough is the local competition?

Does the government respect trademark and franchiser rights?

Can your profits be easily repatriated?

Can you buy all the supplies you need locally?

Is commercial space available and are rents affordable?

Are your local partners financially sound and do they understand the basics of franchising?

9-9

By addressing these issues, franchisers can gain a more realistic understanding of global opportunities. In China, for example, regulations require foreign franchisers to directly own two or more stores for a minimum of 1 year before franchisees can take over the business. Intellectual property protection is also a concern in China.

Investment

Partial or full ownership of operations outside of home country

Foreign Direct Investment (FDI)

Forms

Joint ventures

Minority or majority equity stakes

Outright acquisition

9-10

Foreign direct investment (FDI) figures reflect investment flows out of the home country as companies invest in or acquire plants, equipment, or other assets. Foreign direct investment allows companies to produce, sell, and compete locally in key markets. Examples of FDI abound: Honda built a $550 million assembly plant in Greensburg, Indiana; Hyundai invested $1 billion in a plant in Montgomery, Alabama.

At the end of 2000, cumulative foreign investment by U.S. companies totaled $1.2 trillion. The top three target countries for U.S. investment were the United Kingdom, Canada, and the Netherlands. Investment in the United States by foreign companies also totaled $1.2 trillion; the United Kingdom, Japan, and the Netherlands were the top three sources of investment.

Joint Ventures

Entry strategy for a single target country in which the partners share ownership of a newly-created business entity

Builds upon each partner’s strengths

Examples: Budweiser and Kirin (Japan), GM and Toyota, GM and Daewoo in S. Korea, Ford and Mazda, Chrysler and BMW

9-11

A joint venture with a local partner represents a more extensive form of participation in foreign markets than either exporting or licensing. Strictly speaking, a joint venture is an entry strategy for a single target country in which the partners share ownership of a newly created business entity.

Joint Ventures

Advantages

Allows for risk sharing–financial and political

Provides opportunity to learn new environment

Provides opportunity to achieve synergy by combining strengths of partners

May be the only way to enter market given barriers to entry

Disadvantages

Requires more investment than a licensing agreement

Must share rewards as well as risks

Requires strong coordination

Potential for conflict among partners

Partner may become a competitor

9-12

Joint venture investment is growing rapidly. China is a case in point; for many companies, the price of market entry is the willingness to pursue a joint venture with a local partner. Procter & Gamble has several joint ventures in China. China Great Wall Computer Group is a joint-venture factory in which IBM is the majority partner with a 51 percent stake.

As one global marketing expert warns, “In an alliance you have to learn skills of the partner, rather than just see it as a way to get a product to sell while avoiding a big investment.” Yet, compared with U.S. and European firms, Japanese and Korean firms seem to excel in their ability to leverage new knowledge that comes out of a joint venture. For example, Toyota learned many new things from its partnership with GM—about U.S. supply and transportation and managing American workers—that have been subsequently applied at its Camry plant in Kentucky. However, some American managers involved in the venture complained that the manufacturing expertise they gained was not applied broadly throughout GM. To the extent that this complaint has validity, GM has missed opportunities to leverage new learning. Still, many companies have achieved great successes in joint ventures.

Investment via Equity Stake or Full Ownership

Equity stakes is an investment

Minority ˂ 50%, Majority˃ 50%, Full ownership =100%

Start-up of new operations

Greenfield operations or

Greenfield investment

Merger with an existing enterprise

Acquisition of an existing enterprise

Examples: Roche acquired Genentech in 2008 for $43 billion

9-13

Large-scale direct expansion by means of establishing new facilities can be expensive and require a major commitment of managerial time and energy. However, political or other environmental factors sometimes dictate this approach. As an alternative to greenfield investment in new facilities, acquisition is an instantaneous—and sometimes, less expensive—approach to market entry or expansion. Although full ownership can yield the additional advantage of avoiding communication and conflict of interest problems that may arise with a joint venture or co-production partner, acquisitions still present the demanding and challenging task of integrating the acquired company into the worldwide organization and coordinating activities.

If government restrictions prevent 100 percent ownership by foreign companies, the investing company will have to settle for a majority or minority equity stake. In China, for example, the government usually restricts foreign ownership in joint ventures to a 51 percent majority stake. However, a minority equity stake may suit a company’s business interests. For example, Samsung was content to purchase a 40 percent stake in computer maker AST. As Samsung manager Michael Yang noted, “We thought 100 percent would be very risky, because any time you have a switch of ownership, that creates a lot of uncertainty among the employees.” In other instances, the investing company may start with a minority stake and then increase its share.

Examples of Market Entry & Expansion by Joint Venture

9-14

Examples of Equity Stake

9-15

An equity stake is simply an investment; if the investor owns fewer than 50 percent of the shares, it is a minority stake; ownership of more than half the shares makes it a majority.

Examples of Acquisitions

9-16

Issues in Acquisitions

Globalization is driving acquisitions; smaller firms cannot expand without a partner

“It was very clear to us that Helene Curtis did not have the capacity to project itself in emerging markets around the world. As markets get larger, that forces the smaller players to take action.”

Ronald Gidwitz, CEO Unilever, on acquiring Helene Curtis

Ownership circumvents tariffs & quota barriers, gets new markets, allows technology transfers and gain new manufacturing methods.

9-17

Several of the advantages of joint ventures also apply to ownership, including access to markets and avoidance of tariff and quota barriers. Like joint ventures, ownership also permits important technology experience transfers and provides a company with access to new manufacturing techniques.

Alternatives for Market Entry

Licensing, joint ventures, minority or majority equity stake, and ownership—are points along a continuum of alternative strategies for global market entry and expansion.

Companies may use a combination

Ex. Borden Foods stopped licensing for branded food products in Japan and set up its on production, distribution & marketing but kept JVs in non-food products

9-18

. The overall design of a company’s global strategy may call for combinations of exporting–importing, licensing, joint ventures, and ownership among different operating units. Avon Products uses both acquisition and joint ventures to enter developing markets. A company’s strategy preference may change over time. For example, Borden Inc. ended licensing and joint venture arrangements for branded food products in Japan and set up its own production, distribution, and marketing capabilities for dairy products. Meanwhile, in nonfood products, Borden has maintained joint venture relationships with Japanese partners in flexible packaging and foundry materials.

Global Strategic Partnerships

Possible terms:

Collaborative agreements

Strategic alliances

Strategic international alliances

Global strategic partnerships

Oneworld is a GSP made up of American Airlines and other airlines around the world.

9-19

Recent changes in the political, economic, sociocultural, and technological environments of the global firm have combined to change the relative importance of those strategies. Trade barriers have fallen, markets have globalized, consumer needs and wants have converged, product life cycles have shortened, and new communications, technologies, and trends have emerged. Although these developments provide unprecedented market opportunities, there are strong strategic implications for the global organization and new challenges for the global marketer. Such strategies will undoubtedly incorporate—or may even be structured around—a variety of collaborations. Once thought of only as joint ventures with the more dominant party reaping most of the benefits (or losses) of the partnership, cross-border alliances are taking on surprising new configurations and even more surprising players.

The Nature of Global Strategic Partnerships

9-20

The terminology used to describe the new forms of cooperation strategies varies widely. The phrases collaborative agreements, strategic alliances, strategic international alliances, and global strategic partnerships (GSPs) are frequently used to refer to linkages between companies from different countries who jointly pursue a common goal. A broad spectrum of inter-firm agreements, including joint ventures, can be covered by this terminology. However, the strategic alliances discussed here exhibit three characteristics which are highlighted in this diagram and discussed on the next slide.

Characteristics of Global Strategic Partnerships

Participants remain independent following formation of the alliance

Participants share benefits of alliance as well as control over performance of assigned tasks

Participants make ongoing contributions in technology, products, and other key strategic areas

9-21

Five Attributes of True Global Strategic Partnerships

Two or more companies develop a joint long-term strategy

Relationship is reciprocal

Partners’ vision and efforts are global

Relationship is organized along horizontal lines (not vertical)

When competing in markets not covered by alliance, participants retain national and ideological identities

9-22

Companies forming GSPs must keep these factors in mind. Moreover, successful collaborators will be guided by the following four principles. First, despite the fact that partners are pursuing mutual goals in some areas, partners must remember that they are competitors in others. Second, harmony is not the most important measure of success; some conflict is to be expected. Third, all employees, engineers, and managers must understand where cooperation ends and competitive compromise begins. Finally, as noted earlier, learning from partners is critically important.

Two or more companies develop a joint long-term strategy aimed at achieving world leadership by pursuing cost leadership, differentiation, or a combination of the two. Samsung and Sony are jockeying with each other for leadership in the global television market. One key to profitability in the flat-panel TV market is being the cost leader in panel production. S-LCD is a $2 billion joint venture that produces 60,000 panels per month.

2. The relationship is reciprocal. Each partner possesses specific strengths that it shares with the other; learning must take place on both sides. Samsung is a leader in the manufacturing technologies used to create flat-panel TVs. Sony excels at parlaying advanced technology into world-class consumer products; its engineers specialize in optimizing TV picture quality. Jang Insik, Samsung’s chief executive, says, “If we learn from Sony, it will help us in advancing our technology.”

3. The partners’ vision and efforts are truly global, extending beyond home countries and the home regions to the rest of the world. Sony and Samsung are both global companies that market global brands throughout the world.

4. The relationship is organized along horizontal, not vertical, lines. Continual transfer of resources laterally between partners is required, with technology sharing and resource pooling representing norms. Jang and Sony’s Hiroshi Murayama speak by telephone on a daily basis; they also meet face-to-face each month to discuss panel making.

5. When competing in markets excluded from the partnership, the participants retain their national and ideological identities. Samsung markets a line of high-definition televisions that use digital light processing (DLP) technology. Sony does not produce DLP sets. When developing a DVD player and home theater sound system to match the TV, a Samsung team headed by head TV designer Yunje Kang worked closely with the audio/video division. At Samsung, managers with responsibility for consumer electronics and computer products report to digital media chief Gee-sung Choi. All the designers work side by side on open floors. As noted in a company profile, “the walls between business units are literally nonexistent.” By contrast, in recent years Sony has been plagued by a time-consuming, consensus-driven communication approach among divisions that have operated largely autonomously.

Global Strategic Partnerships

9-23

Success Factors of Alliances

Mission: Successful GSPs create win-win situations, where participants pursue objectives on the basis of mutual need or advantage.

Strategy: A company may establish separate GSPs with different partners; strategy must be thought out up front to avoid conflicts.

Governance: Discussion and consensus must be the norms. Partners must be viewed as equals.

9-24

Success Factors (Con’t)

Culture: Personal chemistry is important, as is the successful development of a shared set of values.

Organization: Innovative structures and designs may be needed to offset the complexity of multi-country management.

Management: Potentially divisive issues must be identified in advance and clear, unitary lines of authority established that will result in commitment by all partners.

9-25

Alliances with Asian Competitors

Western companies must learn from Asian firms’ excellence in manufacturing, overcome NIH syndrome, become students, not teachers

Four common problem areas

Each partner had a different dream

Each must contribute to the alliance and each must depend on the other to a degree that justifies the alliance

Differences in management philosophy, expectations, and approaches

No corporate memory

9-26

NIH means Not Invented Here

A 1991 report by McKinsey and Company shed additional light on the specific problems of alliances between Western and Japanese firms. Oftentimes, problems between partners have less to do with objective levels of performance than with a feeling of mutual disillusionment and missed opportunity.

The first problem is that each partner has a “different dream”; the Japanese partner sees itself emerging from the alliance as a leader in its business or entering new sectors and building a new basis for the future; the Western partner seeks relatively quick and risk-free financial returns. Said one Japanese manager, “Our partner came in looking for a return. They got it. Now they complain that they didn’t build a business. But that isn’t what they set out to create.”

The most attractive partner in the short run is likely to be a company that is already established and competent in the business but with the need to master, say, some new technological skills.

Another common cause of problems is “frictional loss” caused by differences in management philosophy, expectations, and approaches. All functions within the alliance may be affected, and performance is likely to suffer as a consequence. Speaking of his Japanese counterpart, a Western businessperson said, “Our partner just wanted to go ahead and invest without considering whether there would be a return or not.” The Japanese partner stated that “The foreign partner took so long to decide on obvious points that we were always too slow.” Such differences often lead to frustration and time-consuming debates that stifle decision making.

Last, the study found that short-term goals can result in the foreign partner limiting the number of people allocated to the joint venture. Those involved in the venture may perform only 2- or 3-year assignments. The result is “corporate amnesia”; that is, little or no corporate memory is built up on how to compete in Japan. The original goals of the venture will be lost as each new group of managers takes their turn.

Cooperative Alliance in Japan: Keiretsu

Inter-business alliance or enterprise groups in which business families join together to fight for market share

Often cemented by bank ownership of large blocks of stock and by cross-ownership of stock between a company and its buyers and non-financial suppliers

Keiretsu executives can legally sit on each other’s boards, share information, and coordinate prices

9-27

Japan’s keiretsu represent a special category of cooperative strategy. A keiretsu is an inter-business alliance or enterprise group that, in the words of one observer, “resembles a fighting clan in which business families join together to vie for market share.” Keiretsu exist in a broad spectrum of markets, including the capital market, primary goods markets, and component parts markets. Keiretsu relationships are often cemented by bank ownership of large blocks of stock and by cross-ownership of stock between a company and its buyers and nonfinancial suppliers. Further, keiretsu executives can legally sit on each other’s boards, and share information, and coordinate prices in closed-door meetings of “presidents’ councils.” Thus, keiretsu are essentially cartels that have the government’s blessing. While not a market entry strategy per se, keiretsu played an integral role in the international success of Japanese companies as they sought new markets. Several large companies with common ties to a bank are at the center of the Mitsui Group and Mitsubishi Group. These two, together with the Sumitomo, Fuyo, Sanwa, and DKB groups make up the “big six” keiretsu.

Horizontal Keiretsu

Big Six: Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa, DKB Groups

Horizontal keiretsu: intragroup relationships involve shared stock holdings and trading relations

Large, powerful with revenues in hundreds of billions

Can block foreign suppliers causing higher prices

Promotes corporate stability, risk sharing, long-term employment

9-28

Keretsui

Vertical keretsui: Hierarchical alliances between manufacturers and retailers

Matshusita sells its products through its chain of National stores; 50-80% of products are Matshusita brands Panasonic, Technics, and Quasar

Manufacturing keretsui: Vertical hierarchical alliances between automakers suppliers, and component manufacturers

9-29

Cooperative Strategies in South Korea: Chaebol

Composed of dozens of companies, centered around a bank or holding company, and dominated by a founding family

Samsung

Hyundai

Daewoo

9-30

Like the Japanese keiretsu, chaebol are composed of dozens of companies, centered around a central bank or holding company, and dominated by a founding family. However, chaebol are a more recent phenomenon; in the early 1960s, Korea’s military dictator granted government subsidies and export credits to a select group of companies. By the 1980s, Daewoo, Hyundai, LG, and Samsung had become leading producers of low-cost consumer electronics products. The chaebol were a driving force behind South Korea’s economic miracle; GNP increased from $1.9 billion in 1960 to $238 billion in 1990.

21st Century Cooperative Strategies: Targeting the Digital Future

Alliances between companies in several industries that are undergoing transformation and convergence

Computers

Communications

Consumer electronics

Entertainment

9-31

Increasing numbers of companies in all parts of the world are entering into alliances that resemble keiretsu. In fact, the phrase digital keiretsu is frequently used to describe alliances between companies in several industries—computers, communications, consumer electronics, and entertainment—that are undergoing transformation and convergence. These processes are the result of tremendous advances in the ability to transmit and manipulate vast quantities of audio, video, and data and the rapidly approaching era of a global electronic “superhighway” composed of fiber optic cable and digital switching equipment.

21st Century Cooperative Strategies

Semantech: Consortium of 14 tech companies tasked with saving the U.S. chip-making industry

Relationship enterprise: groupings of firms from different industries and countries with common goals and act as one entity

Next stage of evolution of the strategic alliance

Super-alliance

Virtual corporation

9-32

The “relationship enterprise” is said to be the next stage of evolution of the strategic alliance. Groupings of firms in different industries and countries, they will be held together by common goals that encourage them to act almost as a single firm. Within the next few decades, Boeing, British Airways, Siemens, TNT, and Snecma might jointly build several new airports in China. As part of the package, British Airways and TNT would be granted preferential routes and landing slots, the Chinese government would contract to buy all its aircraft from Boeing/Snecma, and Siemens would provide air traffic control systems for all 10 airports.

Another perspective on the future of cooperative strategies envisions the emergence of the “virtual corporation.” As described in a recent Business Week cover story, the virtual corporation “will seem to be a single entity with vast capabilities but will really be the result of numerous collaborations assembled only when they’re needed.” On a global level, the virtual corporation could combine the twin competencies of cost effectiveness and responsiveness; thus, it could pursue the “think globally, act locally” philosophy with ease. This reflects the trend toward “mass customization.”

Market Expansion Strategies

Companies must decide to expand by:

Seeking new markets in existing countries

Seeking new country markets for already identified and served market segments

9-33

The table illustrates the following strategies:

Strategy 1, country and market concentration, involves targeting a limited number of customer segments in a few countries. This is typically a starting point for most companies. It matches company resources and market investment needs.

Strategy 2, country concentration and segment diversification, a company serves many markets in a few countries. This strategy was implemented by many European companies that remained in Europe and sought growth by expanding into new markets.

Strategy 3, country diversification and market concentration, is the classic global strategy whereby a company seeks out the world market for a product.

Strategy 4, country and segment diversification, is the corporate strategy of a global, multi-business company such as Matsushita. Overall, Matsushita is multi-country in scope and its various business units and groups serve multiple segments.

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