Amar KJR Nayak/IB/XIMB
The Globalization of Markets
Theodore Levitt
Key Concerns:
How to customize products for the demands of new
markets?
Differences in culture and values among nations
(Month of Ramadan, Bank Lending rates, etc.)
Amar KJR Nayak/IB/XIMB
Differences in tastes of people in different
regions / nations
Customization of goods / services for different
market segments
Different character of people and companies
under the influence of new technology
Amar KJR Nayak/IB/XIMB
Vindication of Model T
General Rule!
Lower the cost and price
Improve the quality & reliability
Henry Ford – Production of Model T
Need for Global imagination
Amar KJR Nayak/IB/XIMB
Strategic issues
Knowing a lot about many things v/s knowing
everything about one great thing
Give customers what he says he wants or what he
can take
Lower cost international product
– patronage expands exponentially
Amar KJR Nayak/IB/XIMB
Global Corporation accepts and adjusts to the
differences only reluctantly, after relentlessly
testing their immutability, and after trying in
various ways to circumvent and reshape them
Amar KJR Nayak/IB/XIMB
Summary
Converging commonality
Developments in technology
From customizing items to offering globally
standardized products
Only Global companies will achieve long-term
success by Concentrating on what everyone
wants rather than Cater to details of what
everyone thinks they might like
Amar KJR Nayak/IB/XIMB
A strategy!!
Offer everyone simultaneously highquality, more or less standardized
products at optimally low prices
Samsung’s (Washing Machines,
Refrigerators, TVs, etc)
Amar KJR Nayak/IB/XIMB
A strategy!!
Examples?
Global Corporations will seek sensibly
to force suitably standardized products
and practices on the entire globe!!
Prof. Amar KJR Nayak
Global Production Strategies
Factors that influence international
production
Trade Restrictions
Import duties
Exchange Rates
Prof. Amar KJR Nayak
Opportunity for international businesses to
specialize and integrate manufacturing
plants
US Companies in W. Europe in 1970s
A process of rationalization &
International value addition
Nissan, Seimens, Ford Motors
Prof. Amar KJR Nayak
International Division of Labor
Production of standardized products
moving to low cost regions
Ex.: Chemicals, Drugs, Automobiles,
Textiles, etc
Critical functions like R&D
concentrating in a few advanced
countries
Production Cost Reduction Methods
India, US, Japan
Prof. Amar KJR Nayak
Production Cost Reduction Methods
Global Bench Marks
United States
Japan
Market Research
Market Research
Product Characteristics
Product Characteristics
Design
Planned Selling Price
Less Desired Profit
Engineering
Target Cost
Supplier Pricing
Design Engineering Supplier Pricing
Cost
If cost is too high, return to
design phase
Target costs for each component force
marketers, designers, and engineers from
all departments and suppliers to struggle
and negotiate trade-offs
Manufacturing
Manufacturing
Periodic Cost Reduction
Continuous Cost Reduction
Prof. Amar KJR Nayak
Four production strategies
Global concentrated production
Host market production
Product specialization for a global or
regional market
Transnational vertical integration of
production
Business Strategy
European – Merchandize: Colonization
American – Technology: IPLC
Japanese – Mass Production (M&S, T&H)
Case Analysis
STANDARDIZATION STRATEGY
Strategic Maneuvering and Mass market
Dynamics
Cusumano, Mylonadis, and Rosenbloom
The Transformation
Amar KJR Nayak/IB/XIMB
A case of home videocassette recorders
(VCRs)
SONY
JVC/MG
Product
Betamax
VHS
Introduction
1975
1976
Quality
(Technically)
Superior
Not Superior
Amar KJR Nayak/IB/XIMB
Size
Market Position
(End of 1980s)
Market Position
(2000)
SONY
Compact
34
JVC/MG
Bigger
in Size
66
0
100
How did this happen?
Home-Video Families and
World Color TV Shares, 1976-1977
Home-Video Families and
World Color TV Shares, 1976-1977
1976 World Color TV Sales
Company
Sony
Format 1974 VCR
Rank Share
Commitments
(%)
Beta
Betamax prototype 3
7.4
Sanyo
‘’
V-Code in Japan
5
6.2
Toshiba
‘’
V-Code in Japan
6
5.8
Zenith
‘’
none
4
6.4
Total Beta
25.8
1976 World Color TV Sales
Company
Matsushita
Format 1974 VCR
Rank Share
Commitments
(%)
VHS
VX-100 prototype
1
12.7
Hitachi
‘’
none
7
5.6
RCA
‘’
8
5.2
Sharp
‘’
Selectavision
prototype
none
10
3.1
Total VHS
26.6
1976 World Color TV Sales
Company
Format
1974 VCR
Commitments
Philips
Philips
Grunding
‘’
N-1500 in
Europe
N-1500 in
Europe
Total Philips
Rank Share
(%)
2
11.5
9
3.8
15.3
VCR Production and Format
Shares
Amar KJR Nayak/IB/XIMB
VCR Production and Format Shares,
1975-1984 (in percent)
1975 1976 1977 1978 1979 1980
BETA Group
Sony
Others
100
56
51
28
24
22
-
5
5
12
15
11
61
56
40
39
34
Subtotal: 100
Amar KJR Nayak/IB/XIMB
VCR Production and Format Shares,
1975-1984 (in percent)
1975 1976 1977 1978 1979 1980
VHS Group
Matsushita
-
29
27
36
28
29
JVC
-
9
15
19
22
18
Others
-
1
2
5
11
19
Subtotal:
-
39
44
60
61
66
Amar KJR Nayak/IB/XIMB
VCR Production and Format Shares,
1975-1984 ( in percent)
1981 1982 1983 1984
BETA Group
Sony
18
14
12
9
Sanyo
9
10
8
6
Toshiba
4
4
4
3
Others
1
1
2
2
Subtotal:
32
28
25
20
…..
1989
Amar KJR Nayak/IB/XIMB
VCR Production and Format Shares,
1975-1984 (in percent)
1981 1982 1983 1984
VHS Group
Matsushita
JVC
Hitachi
Sharp
Mitsubishi
Sanyo
Others
Subtotal:
28
19
10
7
3
2
68
27
20
10
7
3
3
2
72
29
16
11
9
3
4
2
75
25
17
15
9
4
5
5
80
…..
1989
100
VCRs: The Comparisons
Incompatibility
Amar KJR Nayak/IB/XIMB
Incompatibility in the two systems
Tape handling mechanisms
Cassette Size
Coding schemes for their video signals
Recording-Playing Time
Comparison
Amar KJR Nayak/IB/XIMB
Recording-Playing Time Comparison
Year/Month
1975/5
1976/10
1977/3
1977/10
(Matsushita)
1978/10
1979/3
BETA
1 hr. (Sony)
VHS
2 hr. (JVC)
2 hr. (Sony)
4 hr.
3 hr. (Sony)
4.5 hr. (Sony)
Amar KJR Nayak/IB/XIMB
Recording-Playing Time Comparison
Year/Month
1979/8
(Matsushita)
1979/8
1979/12
1982/3
1982/9
BETA
VHS
6 hr.
4 hr. (JVC)
6 hr. (JVC)
8 hr. (Sony)
5 hr. (Sony)
Special Effects Comparison
Amar KJR Nayak/IB/XIMB
Special Effects Comparison
Sony
Wireless Remote
Introduction Date
(Year/Month)
Matsushita
JVC
1977/3*
1977/6
1979/6
1 / 2 –Speed Machine 1977/3*
1977/6
1979/8
Slow/Still
1979/3
1978/7
1977/12*
Portable VCR
1978/9
1980/2
1978/2*
1 / 3-Speed Machine
1979/3*
1979/8
1979/12
Amar KJR Nayak/IB/XIMB
Special Effects Comparison
Sony
Introduction Date
(Year/Month)
Matsushita JVC
Scan/Slow/Still
1979/3*
1980/6
1979/8
Stereo Recording
1980/7
1979/8*
1979/8*
Hi-Fi
1983/4*
1983/5
1983/11
One-Unit Camera
1983/7*
1985/1
Recorder
* Marks the first to introduce the feature.
1984/3
Group Alignments
Amar KJR Nayak/IB/XIMB
Group Alignments (1983-1984)
Note: Suppliers indicated by initials
(J = JVC, Ma = Matsushita, H = Hitachi, Mi = Mitsubishi, T= Tokyo Sanyo,
S = Sony, To = Toshiba, Sa = Sanyo, P = Philips, G = Grundig)
Japan
VHS GROUP (40)
JVC
Matsushita
Hitachi
Mitsubishi
Sharp
Tokyo Sanyo
U. S.
Magnavox (Ma)
Sylvania (Ma)
Curtis Mathes (Ma)
J.C. Penny (Ma)
GE (Ma)
RCA (H)
Europe
Blaupunkt (Ma)
Zaba (J)
Nordmende (J)
Telefunken (J)
SEL )J)
Thorn-EMI (J)
Amar KJR Nayak/IB/XIMB
Group Alignments (1983-1984)
Note: Suppliers indicated by initials
(J = JVC, Ma = Matsushita, H = Hitachi, Mi = Mitsubishi, T= Tokyo Sanyo,
S = Sony, To = Toshiba, Sa = Sanyo, P = Philips, G = Grundig)
Japan
Brother (Mi)
Ricoh (H)
Tokyo Juki (H)
Canon (Ma)
Asahi Optical (H)
Olympus (Ma)
U. S.
Sears (H)
Zenith (J)
Europe
Thomson-Brandt (J)
Granada (H)
Hangard (H)
Sarolla (H)
Fisher (T)
Luxer (Mi)
Amar KJR Nayak/IB/XIMB
Group Alignments (1983-1984)
Note: Suppliers indicated by initials
(J = JVC, Ma = Matsushita, H = Hitachi, Mi = Mitsubishi, T= Tokyo Sanyo,
S = Sony, To = Toshiba, Sa = Sanyo, P = Philips, G = Grundig)
Japan
Nikon (Ma)
Akai Trio (J)
Sansui (J)
Clarion (J)
Teac (J)
Japan Columbia (H)
Funai
U. S.
Europe
Amar KJR Nayak/IB/XIMB
Group Alignments (1983-1984)
Note: Suppliers indicated by initials
(J = JVC, Ma = Matsushita, H = Hitachi, Mi = Mitsubishi, T= Tokyo Sanyo,
S = Sony, To = Toshiba, Sa = Sanyo, P = Philips, G = Grundig)
Japan
BETA GROUP (12)
Sony
Sanyo
Toshiba
NEC
General (To)
Aiwa
Pioneer (S)
U. S.
Zenith (S)
Sears (Sa)
Europe
Kneekerman (Sa)
Fisher (Sa)
Rank (To)
Amar KJR Nayak/IB/XIMB
Group Alignments (1983-1984)
Note: Suppliers indicated by initials
(J = JVC, Ma = Matsushita, H = Hitachi, Mi = Mitsubishi, T= Tokyo Sanyo,
S = Sony, To = Toshiba, Sa = Sanyo, P = Philips, G = Grundig)
Japan
U. S.
Europe
V – 2000 (7) Philips
Grunding
Siemens (G)
ITT (G)
Loewe Opta (G)
Korting (P)
B & O (P)
VCR Sales by Country and
Format
VCR Sales by Country and Format (1983)
USA
Japan
Britain
W. Germany
France
Italy
Above Totals
Unit Sales VHS Beta V–2000
(millions) %
%
%
4.1
75
25
0
3.4
70
30
0
2.3
74
24
2
1.5
60
20
20
0.4
70
20
10
0.2
60
20
20
11.9
72
25
3
Summary:Strategic Moves
Amar KJR Nayak/IB/XIMB
Strategic Moves of Matsushita Group
Complement Strengths
in Product Development /Mass Production
Managerial Attitude to work with Partners
Make the video cassette players (VCP) compatible
with Video Cassette recorders
Respond to Market Demand
(play duration of VCP)
Amar KJR Nayak/IB/XIMB
Standardize and promote the production of VHS
formatted cassettes
Collaborate with video rental shops to promote
VHS cassette players
Tie-up with other players in the value chain of the
product both in the in home market and foreign
markets
Standardize product through increased production
and increased sales in home and overseas markets:
Critical Volume to Market Standardization
Is the Strategy applicable to you?
Business Strategy – Summary
European – Merchandize: Colonization
American – Technology: IPLC
Japanese – Mass Production (M&S, T&H)
Asian & Indian - ?