February 1, 2014 Chris Schrage, CGBP, Certified CGBP Trainer

Source: David Harvey, The Condition of Postmodernity (Oxford and Cambridge, Mass.: Basil Blackwell, 1989), p. 241, plate 3.1.

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 Change in transportation technology  Change in communication technology

 Access to products not available at home  Raw materials for products  Better quality of life  Comparative Advantage

6  Capital movements replaced trade levels  Production “uncoupled” from employment  World economy dominate-country economies are secondary  End of the capitalism/socialism struggle  E-commerce changes all models  Business and national

 Break up of Soviet Union  Apartheid over- sanctions ended  Privatization of public companies in Brazil, France and England,  Special Economic Zones in China  Democracy started in Latin America

 March 7, 1957  Independence from Great Britain through peaceful negotiations  1957  End of the Korean Conflict and devastation from war

1st British African colony to win independence (1957). Nkrumah espoused pan African socialism. High tariffs. Anti-exporting policy.

Kept lowering tariffs on manufactured goods. Created incentives to export. Reduced quotas. Reduced subsidies. 1950s: 77% of employment in agriculture. Now 20%. Manufacturing GNP went from 10% to over 30%.

 Ghana  1970  GNP/capita  $250  1992  GNP/per capita  $450  GNP Growth/year  1.5%  Shift from productive uses (cocoa) to unproductive uses (subsistence agriculture).  Korea  1970  GNP/per capita  $260  1992  GNP/per capita  $6790  GNP Growth/year  9%  Shift from non-comparative advantage uses (agriculture) to productive uses (labor- intensive manufacturing).

 With a GDP per capita of $25,800 in 2010GDP per capita  Eighth largest exporter in the world  In 2010 ranks 14 th out of 225 nations at 1243 billion US dollars

 GDP - per capita: purchasing power parity - $1,300 (2010)  In 2010 ranks 100 at billion US dollars

 Mature market at home  Underutilized capacity  Leverage competitive advantage  Compete in home market of others.

Global companies understand the balance of standardization and customization required in the world’s marketplace.

 Global Industry  Competitive advantage gained by integrating and leveraging operations on a global scale Five forces analysis can assist a company in formulating the appropriate strategy to gain a competitive advantage

Industry Barriers to Entry Power of Buyers Power of Suppliers Substitute Products Competitive Rivalry

 New entrants mean downward pressure on prices and reduced profitability  Barriers to entry determine the extent of threat of new industry entrants

 Economies of scale  Product differentiation  Capital requirements  Switching costs  Distribution channels  Government policy  Cost advantages independent of scale economies  Competitor response

 Substitute products limits prices  High prices induce buyers to switch to the substitute

 Buyers = manufacturers and retailers, not consumers  Buyers seek to pay the lowest possible price  Buyers have leverage over suppliers when  They purchase in large quantities (enhances supplier dependence on buyer)  Suppliers’ products are commodities  Product represents significant portion of buyer’s costs  Buyer is willing and able to achieve backward integration

 When suppliers have leverage,  Raise prices enough> affect customer profits  Leverage accrues when  Suppliers are large and few in number  Supplier’s products are critical inputs, are highly differentiated, or carry switching costs  Few substitutes  Suppliers are willing and able to sell product themselves

 Refers to all actions taken by firms in the industry to improve their positions and gain advantage over one another  Price competition  Advertising battles  Product positioning  Differentiation

Related and Supporting Industries Strategy, Structure, Rivalry Activity in any one of the four points of the diamond impacts all the others and vice versa Demand Conditions Factor Conditions

Resources Physical Knowledge CapitalInfrastructure Human

The advantage that a nation gains by being home to internationally competitive industries in fields that are related to, or in direct support of, other industries

Market Penetration Strategy Product Development Strategy Market Development Strategy Diversification Strategy

 Achieved when there is a match between a firm’s distinctive competencies and the factors critical for success within its industry  Two ways to achieve competitive advantage  Low-cost strategy  Product differentiation

 Broad market strategies  Cost leadership—low price  Product differentiation—premium price  Narrow market strategies  Cost focus—low price  Focused differentiation—premium price

 Build a wide portfolio of advantages  Develop portfolios by establishing layers on top of one another  Move along the value chain to strengthen competitive advantage

 Search for opportunities in the defensive walls of competitors whose attention is narrowly focused  Focused on a market segment  Focused on a geographic area to the exclusion of others

 Refuse to play by the rules set by industry leaders  Ex: Xerox and Canon  Xerox employed a huge direct sales force; Canon chose to use product dealers  Xerox built a wide range of copiers; Canon standardized machines and components  Xerox leased machines; Canon sold machines

 Use the know-how developed by other companies  Licensing agreements, joint ventures, partnerships, or strategic alliances

Complementary skills Cooperative cultures Compatible goals Commensurate levels of risk

Product Attributes Communication Strategy Pricing Strategy Product Attributes Efforts here are impacted by Differences here

 In today’s business environment, market stability is undermined by  Short product life cycles  Short product design cycles  New technologies  Globalization  Escalation and acceleration of competitive forces  Difficult to achieve one sustainable advantage  Build a series of unsustainable but effective advantages  Marketing focus needs to be on innovation  Learn to create new markets  Must forget “that’s the way we always have done it”

Innovative organizations spend neither time nor resources on defending yesterday. Systematic abandonment of yesterday alone can transfer the resources... for work on the new. Innovative organizations spend neither time nor resources on defending yesterday. Systematic abandonment of yesterday alone can transfer the resources... for work on the new. —Peter Drucker —Peter Drucker

 Global Advertising Strategy  Contemporary Relevance  SPEAKS TO “Consumer’s Heart”  Knows my language- relevant to my lifestyle  Brand Quality  SPEAKS TO “Consumer’s Head”  Value perception

Brand Development Basics RightProduct RightImage RightProfit RightDistribution Motivated People & Partners Promotion Advertising Packaging Revenue & Cost Management New Brands Quality Control

Miller Time is the “MILLER WAY” Rooted in the “urban cool” mindset Globalmiller.com website

43  Free  20 nations (includes US)  Mostly Free  52 nations  Mostly Unfree  73 nations  Repressed  Unrated

 Foreign Corrupt Practices Act

 Grease Payments  U.S. Embargoes  Sanctions Sanctions  Against US Against US  Export Controls  Antitrust Laws  The Sherman Antitrust Act  Federal Trade Commission Act  Product liability  No contingency payment programs  Loser pays fees of both parties

Low-Income Countries GNP < $825 Lower-middle-income Countries GNP ≥ $826 ≤ $3,255 High-Income Countries GNP > $10,666 Upper-middle-income Countries GNP ≥ $3,256 ≤ $10,065 86% of the world’s population

 The basic economics of the BOP market are based on  small unit packages,  low margin per unit,  high volume,  high return on capital employed. FORTUNE AT THE BOTTOM OF THE PYRAMID, Prahalad

 There is Money at the BOP  Ease of access to BOP markets  BOP Markets are brand-conscious  Extremely value conscious  BOP Market is connected  BOP Customers accept advanced technology readily FORTUNE AT THE BOTTOM OF THE PYRAMID, Prahalad

50  Purchases aircraft from Boeing –10% down payment –Rest upon delivery (5 years later)  Revenues of JAL in Yen  Payments in USD  In entered into 10 year forward exchange contract –Value of Yen surged against dollar from ¥240 to ¥99 in 1994 –Misjudgment cost JAL 86 percent more per each aircraft. –Admitted loss of USD 45 million or ¥45 billion

Column 1 GENERAL Duties for all products that do not qualify for special tariff treatment. SPECIAL Duties levels for those countries that fit into special tariff treatment programs- see listing included (Example NAFTA) Column 2 Rate of duties for any products imported directly or indirectly from specific countries- currently: Cuba and North Korea

 International Convention for the Protection of Industrial Property  Paris Convention  Honored by 100 countries  Facilitates multi-country patent registration, ensures that once a company files, it has a “right of priority” in other countries for 1 year from that date  Patent Cooperation Treaty  European Patent Convention  Madrid System Madrid System

55 Sales to other markets Changing Domestic Conditions Lower Cost Structures

Exploit Global Presence Global Money Flows

 Enhance domestic competitiveness  Increase sales and profits  Gain global market share  Reduce dependence on existing markets  Especially during periods of recession  Exploit corporate technology and know-how  Competitive advantage  Extend the sales potential of existing products  Stabilize seasonal market fluctuations  Enhance potential for corporate expansion  Sell excess production capacity  Gain information about foreign competition