WHY TO GO GLOBAL?

The first key success factor is that companies should clarify their strategic intention before going global. They should know clearly why they should go global. Strategic intention includes the following aspects: First, why should we go global? China is a big market. Companies must justify when they choose to go global. Is it to create value for shareholders or to whitewash performance for personal gains? Is it for expansion of the market or acquisition of key resources like energy, technology, talents, and brand? Different indicators will be used to measure a company's success for different motivations. When the strategic intention is clear, the next critical factor is whether a company meets the prerequisites for going global. What are its competitive edges and what enables it to secure a position in the world's arena? Is it low cost, as in the case of Galanz, or economy of scale resulting from industrial integration, as in the case of CIMC, or technical strengths, as in the case of Huawei Technologies, Nuctech Company Limited and others? The next thing to consider is what we can do and cannot do when going global. Possibly it is more important to think clearly about what we cannot do. Galanz is a company that has clear strategic thinking and positioning.Compared with other world-class companies, Galanz finds that it falls far behind them in resources, brand, talents, technology and others. Therefore, it cannot engage in highly-profitable industries. The simple reason is that Galanz cannot compete with international giants in these industries. Out of this consideration, it takes advantage of its low cost advantage and concentrates in mature industries with low margin. Anything else it cannot do? It cannot emphasize brands. It may face the Antitrust Law if it lays too much emphasis on its brand given its large market share. Here are two very important decisions

to be made. One is where we should go global, developing or developed countries? The other is what we should globalize. If it is financing, then we have an easy solution: just get listed in Nasdaq, Hong Kong or Singapore. This way, we needn't step outside China. Or is it R&D, manufacturing or sales and services? Based on these two decisions, I think Chinese companies have four important choices in its globalization. The first choice is to build production bases in such developing countries as Vietnam, Malaysia, and Philippines to take advantage of the local labor and to strengthen global manufacturing capacities. Chinese companies, however, do not have such a need, as China's labor cost itself is low. For companies in mainland China, this should not be the mainstream choice. The second choice has often been used by Chinese companies to leverage their manufacturing strength to provide customers from Europe and North America with OEM, B2B, export or outsourcing services. Indeed, we need to extend our manufacturing advantages into the worldwide markets. Galanz is a good example. Another example is CIMC. Though CIMC has held 70% of container business in the global market, it does not step outside China, but compete on the basis of China's manufacturing advantages to seek overall expansion and serve customers in Europe and North America. The third choice is that a company should try developing countries when it decides to globalize its brand, services a n d p r o d u c t s t o g e t h e r w i t h manufacturing. For example, Huawei Technologies and ZTE have made their own brands known in Pakistan, Indonesia, Russia and South America during the process of globalization. The fourth choice is to use its existing brand to expand to developed countries in Europe and North America, which is

what TCL, Haier and Lenovo have done. The above four choices bring about different challenges to companies. For example, it is more difficult to enter the market in developed countries than in developing countries. The greatest challenge and difficulty is how to change the low-quality image of Chinese products in the minds of western customers. Chinese products are oftenassociated with low cost and low quality.Moreover, a company will face even greater difficulty if it wants to globalize not only its products, but also its services and brand. It needs to build its own marketing channel, manage its own inventories, provide maintenance services, and create a brand image that can be accepted by the consumers. Therefore, the choice made when going global is critical. My advice is we should face the reality and take appropriate measures according to our strengths and resources.

HOW TO GO GLOBAL?
Once we decide whether to go global, the next question is how to go global. There are at least three ways. The first is organic growth - a company relies on itself to build overseas production or sales bases one by one. Huawei Technologies, ZTE and Haier have followed this path. Organic growth strategy enables a company to globalize step by step according to its own timetable. Its advantage lies in that it provides the management team with a cushion period to learn to enhance its operation capability in globalization. Another advantage rests with alignment of cultural management system and relatively low risk. However, i t s

weaknesses are also obvious: the process of globalization may be slow as the company has to seek development in one country after another, and the risk of failure is high as it has to fumble its way by itself. The second is strategic alliance, which is the major model used by Taiwanese companies in seeking globalization. If a company has limited resources and capabilities, it needs concentration. It should concentrate on a certain part in the value chain and form strategic alliance to do sales, production, R&D and market together. Galanz, Midea and Changhong have taken this way. What are the benefits of strategic alliance? The first is the cost, as the company can leverage the resources and strengths of its strategic partners. Low risk is the second benefit. However, it also has its weaknesses: the company falls under others' control and gets a small part of the cake while the majority of profit goes to others' pocket; and additionally, it does not have a firm control of its products, brand and customers. Galanz serves as a good example of strategic alliance. In 1997 when Europe and North America brought antitrust lawsuit against Korean companies, Galanz took the opportunity to develop cooperative relations with the European companies. Some European companies sold machines to Galanz in return for some OEM services and others rented their machines to Galanz, allowing Galanz to produce their own products as long as it manufactured products for these companies 8 hours a day. Another form of strategic alliance is investment in the operation. And one may form strategic alliance with the general distributor when exporting its products. The third is merger and acquisition, which, in my opinion, has the greatest risks. Recently, however, many Chinese

companies, represented by Lenovo and TCL, have chosen this way to speed up their globalization. One advantage in doing so is that a company can rise among the top-rank companies and enhance itself in a short time. The other one is that a company can acquire some critical resources like technology, channels, and talents. The obvious weakness of this approach rests with great risks. When a company is considering M&A, very often, it only pays attention to the superficial things such as channels, market share and technology, but fails to detect real problems in the merged and acquired companies. Very often these companies have so many thorny problems that they are willing to be merged or acquired. Another problem is valuation - we usually pay more than it is worth. Moreover, due to their inadequate experience in globalization, Chinese companies are often at a disadvantage in negotiations. For example, a company forgets to nullify the length of service of the acquired company's staff, and later it finds out it is very costly to lay off these staff. Another problem lies in integration. There is a 70/ 70 rule in management. It means that 70% of cross-cultural M&A deals turn out to be failures, as the projected efficiency cannot be attained. Among the 70% failed M&A deals, 70% of their failures are because of obstacles in cultural integration - the two parties have different ways to do things and make decisions.

SEGMENTATION
MARKET SEGMENTATION Represents an effort to identify and categorize groups of customers and countries according to common characteristics TARGETING

The process of evaluating segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond Focus on the segments that can be reached most effectively, efficiently, and profitably

POSITIONING Positioning is required to differentiate the product or brand in the minds of the target market. GLOBAL MARKET SEGMENTATION Defined as the process of identifying specific segments whether they be country groups or individual consumer groupsof potential customers with homogeneous attributes who are likely to exhibit similar responses to a companys marketing mix 7-5 Upper Middle Lower GLOBAL MARKET SEGMENTATION _ Demographics _ Income _ Population _ Age distribution _ Gender _ Education _ Occupation _ Psychographics _ Behavioral characteristics _ Benefits sought AGE SEGMENTATION Global teens young people between the ages of 12 and 19 A group of teenagers randomly chosen from different

parts of the world will share many of the same tastes Global elite affluent consumers well traveled money to spend on prestigious products with an image of exclusivity Seniors Pensioners or Retirees Treatment and needs vary in region GENDER SEGMENTATION 7-10 In focusing on the needs and wants of one gender, do not miss opportunities to serve the other Companies may offer product lines for both genders Nike, Levi Strauss PSYCHOGRAPHIC SEGMENTATION Grouping people according to attitudes, values, and lifestyles BEHAVIOR SEGMENTATION Focus on whether people purchase a product, as well as how much and how often they use it User status Law of disproportionality Paretos Law 80% of a companys revenues are accounted for by 20% of the customers ETHNIC SEGMENTATION 7-19 The population of many countries includes ethnic groups of significant size. South Africa- MANY tribles Three main ethnic groups in U.S. African-Americans, Asian-Americans, and Hispanic Americans

40-plus million Hispanic Americans (14% of total population) with $560 billion annual buying power CA Mexicans have after-tax income of $100 billion Hispanic teens will rise from 12 to 18 percent of the U.S. teen population in the next decade. What other ethnic groups have minority status? What about European descent Americans-Native American

ASSESSING MARKET POTENTIAL _Three basic criteria _ Current size _ of market segment _ growth potential _ Competition _ How much _ Strength _ Vunerability _ Compatibility _ companys overall objectives _ feasibility of success with the target audience

 INTERNATIONAL BUSINESS HOW DOES A COMPANY GO GLOBAL & SEGMENTATIONS

SUBMITTED BY : S.SHAMAIL SHAH SUBMITTED TO : Sir EHTISHAM