??. 322 ??????? ?????????????????????????? BI. 322 Global Business and Strategy

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??. 322 ??????? ??????????????????????????BI.
322 Global Business and Strategy
Integrated Bachelors and Masters Degree
Program In Accounting and Business Management
(IBMP) Faculty of Commerce and Accountancy,
Thammasat University

• Mr. Gavintorn Atthakor
• Email gavin.boat_at_gmail.com

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Strategy?
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A Global View
Comparison of Various Continents
192
147.5 Bn
6,397
Australia/Ociania 32

7.7
14
727
9.9
380
13.2
13.2
46
501
17.8
878
12
24.3
Australia/Oceania
23
Europe
30.0
53
Antarctica
3,879
South America
North America
44.6
44
Africa
Asia
(Million Sq. Km.)
(Million)
Note As of 2006 Source WorldAtlas.com
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Largest and Most Populous Countries of the World
Top 5 Countries By Population
Top 5 Countries By Area
Rank Country Population (Mil.)
1 China 1,306
2 India 1,080
3 USA 296
4 Indonesia 242
5 Brazil 186
Rank Country Area (Mil. Sq. Km)
1 Russia 17.0
2 Canada 9.9
3 USA 9.6
4 China 9.5
5 Brazil 8.5
19 Thailand 65
49 Thailand 0.5
Note As of 2006 Source WorldAtlas.com
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Who Cares About Ranking by Population and Area?

• Whos the RICHEST Country??

So how do we define WEALTH??
GDP (Gross Domestic Product)
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What is GDP?

• The gross domestic product (GDP) or gross
  domestic income (GDI) is one of the measures of
  national income and output for a given country's
  economy. GDP is defined as the total market value
  of all final goods and services produced within
  the country in a given period of time
• GDP C I G (X-M)
• Where
• C Consumption
• I Investment
• G Government Spending
• X Export
• M Imports

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So Who is The Richest?
International Dollar Billion
GDP (PPP) By Country (Top 30)
23 Thailand
Country
But USA and China has a lot of productive units
(people), Whats the GDP per Capita?
Note As of 2007 Source World Bank
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GDP per Capita
International Dollar 000
GDP (PPP) Per Capita By Country (Top 30)
69 Thailand 8,138
Country
Note As of 2007 Source World Bank
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Purchasing Power Parity (PPP)

• Purchasing power parity is an economic technique
  used when attempting to determine the relative
  values of two currencies.
• PPP takes into account this lower cost of living
  and adjusts for it as though all income was spent
  locally.
• The PPP exchange rate (real exchange rate)
  equalizes the purchasing power of different
  currencies in their home countries for a given
  basket of goods.
• PPP is based on the assumption that in an ideally
  efficient market, identical goods should have
  only one price.
• E.g. The Big Max Index and the iPod Index

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Big Mac Index
Source Economist July 2008
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A Pictorial View of PPP
Note As of 2007 Source World Bank
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Developed Markets
Greece Hong Kong Ireland Italy Japan
Netherlands New Zealand Norway
Portugal Singapore Spain Sweden
Switzerland United Kingdom United States

• Australia
• Austria
• Belgium
• Canada
• Denmark
• Finland
• France
• Germany

PLUS, Russia Group of Eight (G8)
Source Morgan Stanleys EM Index (May 2008)
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G8 Countries Dominates The Worlds Economy
of Total
Rest of the World
G8 Countries
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27 Countries In the European Union (EU)Making It
the Second Largest Economy
15 Countries Adopted Single Currency ()
12 Other Countries Retained their Own Currencies

• Austria
• Belgium
• Cyprus
• Finland
• France
• Germany
• Greece
• Ireland
• Italy
• Luxembourg
• Malta
• Netherlands
• Portugal
• Slovenia
• Spain

Bulgaria Czech Republic Denmark Estonia Hungary La
tvia Lithuania Poland Romania Slovakia Sweden UK
EU Statistics Population 500 mil (3) Area
4 mil. Sq. Km (6) GDP_PPP 10.3 trillion
(2)
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Emerging Markets
2. Rapidly Growing Markets
Emerging Market is a term used to describe
countries that are between developing and
developed status and are going through rapid
industrialization.

• Argentina
• Brazil(2)
• Chile
• China(2)
• Colombia
• Czech Republic
• Egypt(2)
• Hungary
• India(2)
• Indonesia(2)

Iran Israel(1) Jordan Malaysia Mexico(2)
Morocco Pakistan Peru Philippines
Poland(2) Russia(2) South Africa(2) South
Korea(1) Taiwan(1) Thailand Tunisia
Turkey(2) Vietnam

• More than EM but maintained in index for
  continuity
• Big Emerging Markets
• Source Morgan Stanleys EM Index (June 2006)

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BRIC Countries Accounts for 22 of the Worlds
GDP
2. Rapidly Growing Markets
of Total
Rest of the World
BRIC Countries
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The Other Emerging Markets Group Sounds More Like
Charity
Emerging Market is a term used to describe
countries that are between developing and
developed status and are going through rapid
industrialization.

• Argentina
• Brazil(2)
• Chile
• China(2)
• Colombia
• Czech Republic
• Egypt(2)
• Hungary
• India(2)
• Indonesia(2)

Iran Israel(1) Jordan Malaysia Mexico(2)
Morocco Pakistan Peru Philippines
Poland(2) Russia(2) South Africa(2) South
Korea(1) Taiwan(1) Thailand Tunisia
Turkey(2) Vietnam

• More than EM but maintained in index for
  continuity
• Big Emerging Markets
• Source Morgan Stanleys EM Index (June 2006)

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Most of Large Corporations are Global Firms (1)
The ranking is based on a mix of four metrics
Sales, Profit, Assets and Market value.
Note As of 2007 Source Forbes
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Most of Large Corporations are Global Firms (2)

• 356,000 staffs
• Over 200 million customer accounts in over 100
  countries
• Diversified financial services firm
• Consumer Group (Citicards, Citifinancial,
  CitiBank)
• Wealth management Group
• Institutional Client Gtroup
• Over 50 of revenue from international businesses

• 82,000 staffs worldwide
• Operate in over 40 countries in 6 continents
• Multiple businesses and brands
• Upstream (oil exploration, extraction, shipping,
  and wholesale operations)
• Downstream (marketing, refining, and retail
  operations)
• Brands Esso, Exxon, Mobil

• 138,000 staffs in 80 countries
• 100 Brands in over 20 product catagories
• Pantene, Head Shoulders, Vicks, CoverGirl,
  Olay, Oral-B, Duracell, Pringles etc..

Note As of 2007 Source World Bank, Company
Websites
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What is Strategy??

• A companys STRATEGY is its action plan for
  running the business and conducing operations
• These action plans are in place in order to
• Grow the business
• Attract and please customers
• Compete successfully
• Conduct operations
• Improve companys financial/market performances

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5 Generic Competitive Strategies
Overall Low-Cost Provider Strategy
Broad Differentiated Strategy
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Broad Cross-Section of Buyers
Best-Cost Provider Strategy
Market Target
5
Focused Low-Cost Provider Strategy
Focused Differentiated Strategy
Narrow Buyer Segment (Niche)
3
2
Lower Cost
Differentiation
1
Type of Competitive Advantage Being Pursued
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How to Achieve Low Cost Advantage?Examples
1. Low-Cost

• Economies of Scale
• Operate to full capacity
• Bargaining power
• Learning Curve
• Boost sales to spread Fixed/Overhead costs
• RD, advertising, SGA expenses (selling,
  general, Admin)
• Improving supply chain efficiency
• Substitute with low cost components/materials
• Online/IT software
• Labour-saving methods
• Outsourcing vs Vertical integration
• Cutting out the middle man and going directly
  to customers
• Streamlining operations
• Redesign products
• Offering frills-free product
• Limiting product line

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When Low-Cost Provider Strategy Works Best
1. Low-Cost

• Vigorous price competition among rival
  sellers/competitors
• Products are essentially identical and supplies
  are readily available
• There are few ways to achieve product
  differentiation
• Most buyers use product in the same way
• Low switching costs for customers to change
  brands
• A buyers market and bargain down prices
• Industry newcomers use low introductory prices to
  gain customer base

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How to Differentiate?Examples
2. Differentiated
Types of Differentiations
Examples

• Unique tastes
• Multiple features
• Wide selection in one place
• Superior service
• Spare parts availability
• Engineering design and performance
• Product reliability
• Prestige and distinctiveness
• Quality manufacture
• Technological leadership
• Full range of services
• Complete line of products
• Superior image/reputations

Dr. Pepper Microsoft Windows Tesco
Lotus FedEx Toyota Mercedes Benz IBM Rolex Honda 3
M SCB PG Starbucks

• Key Success of Differentiation
• Differentiation must be difficult or expensive to
  copy
• Buyers must value the differentiation (either
  Actual vs Perceived Value)

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When Differentiation Strategy Works Best
2. Differentiated

• Buyers needs and uses of product are diverse
• There are many ways to differentiate the product
  (and buyers value these differentiations)
• Few rival firms are not able or willing to follow
  the differentiated approach
• Industry is dynamic and evolves around evolving
  product

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Focused (Niche) Market Strategy
3. Niche

• Focused Strategies concentrates on a narrow piece
  of the total market
• Companies can choose to focus on a variety of
  niche markets
• By geographic areas
• By customer segments
• E.g. Gender, Age, Occupation
• By specific product category
• E.g. High-end goods
• By product usage/attributes
• E.g. Online, Direct sales

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When Focused (Niche) Strategy Works Best
3. Niche

• Target market niche is large enough to be
  profitable (with growth potential)
• Industry leaders do not have presence in the
  market
• Customer needs in market is specialized
• Few rivals are attempting to specialized in same
  segment
• Company has a loyal customer base

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Broad Strategy Appeals to Large Spectrum of Buyers
4. Broad

• The strategy does not focus on a particular
  market/customer, but appeals to broad spectrum of
  buyers
• But still needs to have a competitive advantage
• Through Lower Cost, Differentiation
• or stronger Brand
• Examples,
• McDonalds
• Coca-Cola

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What is Best-Cost Strategy?
5. Best-Cost

• Also known as hybrid strategy
• Include up-scale attributes
• At lower cost than rivals
• Target market Value-conscious buyers (Appealing
  extras at appealing low price)
• Value ? Quality/Price
• Best-Cost Strategy works best when
• Buyers and products are diverse
• Buyers are sensitive to price and value
• Company has resources, know-how and capabilities
  to execute strategy

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Best-Cost Example Toyotas Lexus
5. Best-Cost
Illustrative

• Toyota has achieved low-cost leadership
• Efficient supply chain management
• Low-cost assembly
• Used Best-Cost Strategy for Lexus
• Designing high-performance characteristics to
  compete in luxury market
• Leverage Toyotas low-cost capabilities to
  incorporate upscale quality
• Underprice comparable models of Mercedes Benz and
  BMW
• Established separate (more personalized and
  attentive) dealers for Lexus

High (-)
IS250
C-240
Price-Quality Trade-off
Quality
Camry
Low (-)
Low ()
High (-)
Price
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Pitfalls of Each Strategy
Low-Cost Strategy
Differentiation Strategy
Best-Cost Strategy
Niche-Market Strategy

• Get carried away with cost and price cutting.
  (Price War) Ending up with lower overall
  profits
• Cost advantage is not sustainable and rivals are
  able to catch-up quickly
• Low product quality due to over-aggressive cost
  cutting

• Competitors are able to copy quickly
• Buyers see little value in the unique attribute
  of the product
• - Buyers not willing to pay the premium of
  differentiation
• Overspending on differentiation.

• Getting squeezed between Low-Cost and
  Differentiated competitors

• Targeted market not big enough to be profitable
• Battle head-to-head with industry-leaders or too
  many other competitors
• Changes in needs of niche customers towards
  mainstream

Broad Market Strategy

• Unfocused and unable to compete (with niche
  players) and meet needs of customers
• High cost to serve

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Homework/Reading

• Sidestepping Economies of Scale, 5 Future
  Strategies You Need to Know Right Now
• by George Stalk (Senior partner of The Boston
  Consulting Group)
• Losing its shine (Japans luxury goods market),
  The Economist (September 20th, 2008)
• Minding the Cost Gap, Globality Competing with
  Everyone From Everywhere For Everything, HL
  Sirkin, JW Hemerling, AK Bhattacharya

1
2
3
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Strategies for Specific Situations

• 3 commonly encountered situations.
• Companies competing in emerging industries
• Companies competing in rapidly growing markets
• Companies competing in maturing, stagnant or
  declining industries

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A Typical Product Life Cycles Divided Into 4
Stages
1. Emerging Industries
Examples
Hybrid Vehicles
iPods
DVD, Neon lights
CRT Television
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BCG Matrix
1. Emerging Industries

• Also known as Growth-Share Matrix
• Developed by Bruce Henderson of The Boston
  Consulting Group (BCG) in 1970 to analyze
  business units or product line so that companies
  can better allocate their resources.

High ()
Question Mark
Star
?
Divest Remaining
Select A Few
Invest
Growth Rate
Dog
Cash Cow
Liquidate
Low (-)
Low (-)
High ()
Relative Market Share
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A (Hypothetical) Example of BCG MatrixSony
1. Emerging Industries
Sonys Portfolio (By Product Line)
Revenue
Wii
DVD Player
Business Growth Rate ()
Plasma TV
Play Stn.
VCR
Hi-Fi
Digital Cam.
Video Cam
Video Digital
0.2x
0.5x
4x
5x
Relative Market Share(1)

• Relative Market Share Companys Mkt
  Share/Largest Competitors Mkt Share
• E.g. If cos share is 20 and competitors share
  is 5, Relative Share is 4x.

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A (Hypothetical) Example of BCG MatrixSony
1. Emerging Industries
Sonys Portfolio (By Country)
Revenue
USA
DVD Player
Business Growth Rate ()
Japan
China
Singapore
France
UK
India
Thailand
0.2x
0.5x
4x
5x
Relative Market Share(1)

• Relative Market Share Companys Mkt
  Share/Largest Competitors Mkt Share
• E.g. If cos share is 20 and competitors share
  is 5, Relative Share is 4x.

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Relative Freedom Despite Some Challenges
1. Emerging Industries
Challenges in Emerging Industries
Strategy Options

• Uncertainties about how large markets going to
  get (and when)
• Race to perfect the technology (which will be the
  industry standard)
• Need to overcome customers concerns about
  product attributes
• Barrier to entry are relatively low in some cases
  (if not protected by patent)
• Might be some problems securing raw materials
  (suppliers unprepared)
• Liquidity problems for small companies (to
  support RD)

• Push to perfect technology, improve product
  quality/attributes
• Consider merging or acquiring another firm to
  gain added expertise
• Or alliance with companies related/complementary
  technologies
• Alliance with key suppliers to secure
  distribution channels
• Try to gain first mover advantage by adopting
  dominant technology
• Make it easy and cheap for first-time buyers
• - Followed by further prices cuts to get next
  layer of customers
• Create product awareness through
  advertising/marketing

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Red vs Blue Ocean
1. Emerging Industries

• Red Ocean
• Industry boundaries are defined and accepted
• Competitive rules are known
• Companies try to outperform their rivals on
  contracting markets
• Commoditization of products and services
• Blue Ocean
• Untapped market space
• Created by expanding existing industry boundaries
• Competition is irrelevant
• Rules of the game are waiting to be set

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Whos in the Emerging Markets?
2. Rapidly Growing Markets
Emerging Market is a term used to describe
countries that are between developing and
developed status and are going through rapid
industrialization.

• More than EM but maintained in index for
  continuity
• Big Emerging Markets
• Source Morgan Stanleys EM Index (June 2006)

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Speed is Key for Growing Markets
2. Rapidly Growing Markets

• Capture largest share as soon as possible
• Driving down costs per unit to attract customers
• Increase production capacities to meet growing
  demands
• Capture key distribution channels and sales
  outlets
• Expand geographic coverage
• Expand product range/line to appeal to wider
  customer range

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Making Cows, Not Dogs
3. Maturing, Stagnant, Declining Industries

• Maturing Industries When nearly all the
  potential buyers are already users

High ()
Question Mark
Star
?
Divest Remaining
Select A Few
Invest
Growth Rate
Dog
Cash Cow
Liquidate
Low (-)
Low (-)
High ()
Relative Market Share
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Industry Growth Rates In Thailand (1)
3. Maturing, Stagnant, Declining Industries
Industry Average 0.48
GDP Growth 4.5
Change in Industrial Production Index

Declining
Matured
Growing
TextilesTextile Products
Transportation Equipments
Furniture and fixtures
Products of Leather
Electrical Appliance
Setting Jewellery
Others
Industry
Note As of 2006 2007 (Jan) Source BOI
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Industry Growth Rates In Thailand (2)
3. Maturing, Stagnant, Declining Industries
Change in Industrial Production Index

Industry Average 3.9
GDP Growth 4.5
Declining
Matured
Growing
TextilesTextile Products
Transportation Equipments
Furniture and fixtures
Products of Leather
Electrical Appliance
Setting Jewellery
Others
Industry
Source Bloomberg (2006-2007)
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Grow It vs Milk It
3. Maturing, Stagnant, Declining Industries
Grow It Strategies to Extend the Life of
Maturing/Stagnant Market
Milk It Strategies to Fit the Maturing Market

• Going head-to-head with competitors Stealing
  market share
• Make the product more sticky
• - Switching (to competitor) is more difficult
• - Create barrier to entry for newcomers
• Emphasize on Value
• Re-vamp brand and product to invigorate demand
• Acquiring rival firms
• Grow internationally

• Streamlining operations to trim costs and
  improve margins
• Build new or more flexible capabilities
• Maintain high standards of product quality and
  services
• Pruning marginal products and models

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Get Rid Of It
3. Maturing, Stagnant, Declining Industries
Strategic Options for Declining Industries
End-Game Strategies
Focus on the growing segments of the
industry Examples Ben Jerrys and
Haagen-Daz Stress differentiation Example PGs
electric toothbrush and related
products Innovative cost reductions to improve
margins

• Slow exit
• Generate as much cash from business for as long
  as possible
• Cut-expenses to rock-bottom
• Sell
• Fast exit
• Find perspective buyer in early stage of decline

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Diversification

• Diversification is a strategy that companies use
  grow their business by entering new market with a
  new product
• Ansoff Product-Market Growth Matrix.

Product
Present
New
Market Development
Product Development
Present
Market
Market Penetration
Diversification
New
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Examples with in the Ansoff Matrix
Product
Present
New
Market Development
Product Development
Present
Market
Market Penetration
Diversification
New
40 brands in 16 Businesses
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There are Two Types of Diversification
Concentric Diversification
Conglomerate Diversification
Diversification to a new product/market that
leverages the companys existing product,
customer base, technology or competency. Example
Boonrawd Brewery
Diversification to a totally new and unrelated
business. Example
What are the advantages disadvantages of each
type of Diversification?
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Diversification Photohunt
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Why Do They Choose To Be So Diversified?