0 Schedule 8-5P&G 8-6P&G Cont. Summary Evaluations 8-7ClipIt! discussion 8-8Presentations 8-12 Final in Class

CH-ZWA jsmGB P&G James Oldroyd Kellogg Graduate School of Management Northwestern University TNRB

P&G Japan Case Summary Each “affiliate” country has a strategic role that influences strategy, structure, and the role of the country manager. The strategic role of the country also influences which functions are duplicated within the country (e.g., R&D, mfg., etc.). A lead market must have R&D. The country manager’s role is a function of the strategic role of the country in the multinational firm’s overall strategy: - Access new markets with existing products (Implementer) - Develop new markets and adapt and develop new products for those markets (Local Manager) - Develop “lead” markets from which to learn and transfer knowledge to other relevant markets (Global Network Manager) There are numerous potential competitive advantages that MNCs can realize by thinking about their firm as a global network of resources and capabilities.

3 P&G Update: Performance in Asia Opened technical center in Kobe in 1993; 3 mfg. plants Now sell 20 brands with market leadership in 1/3 of those. “P&G views Japan as one of the top two markets in Asia. The Japanese market is made up of very discriminating consumers, intense competition, and a need for constant product innovation. If P&G can do well in Japan, P&G can do well in any other market. We take the Japanese market very seriously; although I wouldn’t consider it a major growth market, I would consider it a market that we want to maintain market leadership in.” · P&G executive 4/21/98 We use what we learn in one market to succeed in others · P&G executive 4/9/01

Country Management Issues Issues: What is the role of a country organization? n What activities, resources to locate within a country? n How is an affiliate integrated into worldwide operations? What is the role of the country manager (CM)? n How can a CM define and meet local and global goals? n What role does the CM play in a firm’s worldwide strategy? Country Organization Role Traditional View n Organization to sell products locally Emerging View (interdependent markets as part of global network) n Pool of resources that happen to be located within a national market that are used to compete locally and globally

Roles of Country Organizations Source: Bartlett and Ghoshal

Country Management Model Stage 1: Global Strategy/Structure Export focus on sales and distribution Worldwide units dominate structure (local staff report to global units) TRADER Country manager as TRADER (implementer) Stage 2: Multinational Strategy/Structure Focus on developing, making, and selling broader line to locally adapted products MANAGER Country Manager as MANAGER (potentate) Stage 3: Transnational Strategy/Structure Focus on worldwide integration, reducing local authority, standardizing systems GLOBAL NETWORK MANAGER Country manager as GLOBAL NETWORK MANAGER (cabinet member)

Strategic Role of Country Local Implementor (Trader) Country Strategy (Global) Implement common strategy in new foreign market –Sale existing products in new market Build up initial local infrastructure Control operations in line with corporate strategy Country Manager Expatriate –Experience with company products, systems Entrepreneur –Identify new business opportunities with existing pdts./capabilities Local Market Suppliers Customers Government Competitors Country Manager Local Operations Corporate Headquarters

Strategic Role of Country Local Manager Country Strategy (Multi-Domestic) Develop and profitably expand local business –Adapt products –Expand scope of local resources, activities Install local structure and systems in line with local needs Country Manager Local Expertise is critical –Experience with local market (customers, distribution network, workers, government, etc.). Manager –Manage and coordinate various functions/entire business Entrepreneur –Build business, new products, etc. Country Manager Local Market Local Operations Suppliers Customers Government Competitors Corporate Headquarters

Strategic Role of Country Global Network Manager (cabinet member) Country Strategy (Trans-national) -Expand local business - Integrate local business within worldwide operations -Develop “learning” routines (lead market) to transfer knowledge to other markets -Access, leverage global resources Country Manager Local expertise, Global access Experience with local market and worldwide operations of the company. “Ambassador” n Manage local interests globally n Manage global interests locally Country Manager Local Market Local Operations Customers Government Competitors Corporate Headquarters

Why the Global Network (Transnational) is Valuable Where is the Value in a Global Network? Learning and capability development (P&G, Bain) Options and access on large new markets (Otis) Operating flexibility to shift production to changing factor conditions, exchange rates, etc. (Nike) Ability to arbitrage differences in tax regimes, transfer pricing, etc. Global Network Perspective

Knowledge Requirements of a Global Manager Strategic Management Concepts Country-Specific Knowledge (i.e., culture, gov’t regulations, market conditions, etc.) Global Environment (macroeconomic, financial, political, competitive) Firm-Specific Knowledge (capabilities, products, etc.)