III. How to glocalize?

(Anh Th _498 + Ph

ng Th o _ )

1. Strategic Alternatives of Multinational Companies (Anh Th ) y Home Replication Strategy y Multi-domestic Strategy y Global Strategy y Transnational Strategy 2. Strategies for Coca Cola Company (Ph Vocabulary: No Vocabulary 1 core competency English meaning distinguishes an enterprise from its competitors. 2 Local responsiveness 3 4 5 6 7 8 The necessity to be responsive to different customer around the world. Transnational(adj) extending or operating across national Xuyn qu c gia boundaries Replication(n) Alienate (v) Duplication (n) Endeavor (n) MNE the action of copying or reproducing S l p l i something make (someone) estranged To copy something exactlly Try hard to do something Multinational Enterprise S sao chp S c g ng Cng ty a qu c gia
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ng Th o) Vietnamese

a defining capability or advantage that N ng l c c t li

p a ph

ng nhu ng

preferences c u

feel isolated or Lm cho xa lnh

Adequate (adj)

enough in quantity, or good enough or need.

, ng

in quality, for a particular purpose thch h p, th a Homogenous (adj) consisting of things or people that ng nh t, cng

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are all the same or all of the same ngu n g c. type

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Mandatory (adj) Fundamentally (adv) Diversification (n)

required by law in every way that is important

B t bu c V c ch t b n, b n

12

13

The act of developing a wider range S of products, interests, skills, etc. in order to be more successful or reduce risk

a d ng ha

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Reputation (n)

the opinion that people have about N i danh v ., what sb/sth is like, based on what c danh ti ng has happened in the past v . i my u

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Vulnerable (adj) Division (n)

weak and easily hurt physically or emotionally

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the process or result of dividing into S phn chia separate parts; the process or result of dividing sth or sharing it out:

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Discrete (adj) Accomplish (v)

independent of other things of the Ring bi t, ring same type r . to succeed in doing or completing Hon thnh sth

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Detailed explaination 1. Strategic Alternatives of Multinational Companies Multinationals corporations typically adopt one of four strategic alternatives in their attempt to balance the three goals of global efficiencies, multinational flexibility, and worldwide learning. There four strategies are as follows:  Home Replication Strategy

In this strategy, a firm utilizes the core competency or firm-specific advantage it developed at home as its main competitive weapon in the foreign markets that it enters. That is, it takes what it does exceptionally well in its home market and attempts to duplicate it in foreign markets.  Multi-domestic Strategy It is the second alternative available to international firm. A multidomestic corporation views itself as a collection of relatively independent operating subsidiaries, each of which focuses on a specific domestic market.  Global Strategy It is the third alternative available for international firms. A global corporations views the world as a single marketplace and has as its primary goal the creation of standardized goods and services that will address the needs of customers worldwide.  Transnational Strategy The transnational corporation attempts to combine the benefits of global scale efficiencies with the benefits of local responsiveness. Advantage Home Replication - Leverages Strategy home country based advantages - Relatetively easy to implement Multi-domestic Strategy Leverages low-cost advantages Maximizes local responsiveness Disadvantage - Lack of local responsiveness - May result in foreign customer alienation - High costs due to duplication of efforts in multiple countries - Too much local autonomy Global Strategy - Lack of local responsiveness - Too much centralized control Transnational Strategy - Cost efcient while being - Organizationally complex locally responsive - Engages in global learning and diffusion of innovations - Difcult to implement

On the disadvantage side, home replication strategy often lacks local responsiveness because it focuses on the home country. This strategy makes sense when the majority of a firms customers are domestic. However, when a firm aspires to broaden its international scope, failing to be mindful of foreign customers needs and wants may alienate those potential customers. For example, when Wal-Mart entered Brazil, the stores initially were exactly the same copy as its US stores, including having a large number of American footballs. Considering that Brazil has won soccers World Cup five times, more wins than any other country, nobody (except a few homesick American expatriates in their spare time) plays American football there. Localization strategy is an extension of the home replication strategy. Localization (multidomestic) strategy and focuses adaptation. on a While number of foreign global countries/regions, each of which is regarded as a stand-alone local (domestic) market worthy of significant attention sacrificing efficiencies, this strategy is effective when differences among national and regional markets are clear and pressures for cost reductions are low. For example, MTV started with a home replication strategy when first venturing overseas; it simply broadcast American programming. It has now switched to a localization strategy by broadcasting in local languages. In terms of disadvantages, localization strategy has high costs due to duplication of efforts in multiple countries. The costs of producing such a variety of programming for MTV are obviously greater than the costs of producing one set of programming. As a result, this strategy is only appropriate in industries where the pressures for cost reductions are not signifi cant. Another potential drawback is too much local autonomy, which happens when each subsidiary regards its country as so unique that it is diffi cult to introduce corporate-wide changes. For example, Unilever had seventeen country subsidiaries in Europe in the 1980s and it took four years to persuade all seventeen subsidiaries to introduce a single new detergent across Europe. As the opposite of localization strategy, global standardization strategy is sometimes simply referred to as global strategy. Its hallmark is the

development and distribution of standardized products worldwide in order to reap the maximum benefits from low-cost advantages. Although home replication and global standardization strategies both minimize local responsiveness, a crucial difference is that an MNE pursuing a global standardization strategy is not limited to its major operations at home. In a number of countries, the MNE may designate centers of excellence, defined as subsidiaries explicitly recognized as a source of important capabilities, with the intention that these capabilities be leveraged by and/or disseminated to other subsidiaries. For example, Merck Frosst Canada, the Canadian subsidiary of Merck, is a center of excellence in R&D. Centers of excellence are often given a worldwide (or global) mandate, namely, a charter to be responsible for one MNE function throughout the world. HPs Singapore subsidiary, for instance, has a worldwide mandate to develop, produce, and market all of HPs handheld products. In terms of disadvantages, a global standardization strategy obviously sacrifi ces local responsiveness. This strategy makes great sense in industries where pressures for cost reductions are paramount and pressures for local responsiveness are relatively minor (particularly in commodity industries such as semiconductors and tires). However, as noted earlier, in industries ranging from automobiles to consumer products, a one-size-fits-all strategy may be inappropriate. Consequently, arguments such as all industries are becoming global and all firms need to pursue a global (standardization) strategy are potentially misleading. Transnational strategy aims to capture the best of both worlds by endeavoring to be both cost efficient and locally responsive. In addition to cost efficiency and local responsiveness, a third hallmark of this strategy is global learning and diffusion of innovations. Traditionally, the diffusion of innovations in MNEs is a one-way fl ow, from the home country to various host countries the label home replication says it all (!). Underpinning such a one-way fl ow is the assumption that the home country is the best location for generating innovations. However, this assumption is increasingly challenged by critics who suggest that innovations are inherently risky

and uncertain and that there is no guarantee that the home country will generate the highest-quality innovations. MNEs that engage in a transnational strategy promote global learning and diffusion of innovations in multiple ways. Innovations not only flow from the home country to host countries (which is the traditional flow), but also flow from host countries to the home country and among subsidiaries in multiple host countries.Kia Motors, for example, not only operates a design center in Seoul, Korea, but also has two other design centers in Los Angeles and Frankfurt, tapping into automotive innovations generated in North America and Europe. On the disadvantage side, a transnational strategy is organizationally complex and difficult to implement. The large amount of knowledge sharing and coordination may slow down decision making. Trying to achieve cost efficiencies, local responsiveness, and global learning simultaneously places contradictory demands on the organizational capabilities of MNEs . 3. Strategies for Coca Cola Company a/ Factors affecting the strategic management issues Language Culture Politics Economy Governmental interference Labor Skilled available labors are English used as a second Use the local language required in language Relatively homogenous Unstable Underdeveloped Reasonably predictable many situations Quite diverse, both between countries and within countries Often volatile and of decisive importance Wide variations among countries and among regions within countries Often extensive and subject to rapid change not Skilled labors often scarce, requiring training or redesign of production methods

Financing

Moderately financial markets

developed Often poorly developed financial markets; capital flows subject to government control Sometimes data difficult and

Market research Advertising

Data collect is not very easy

expensive to collect Media are available with Media limited; many restrictions; low some restrictions literacy rates rule out print media in some countries Must change from one currency to another Often adequate A worse problem may have mandatory worker

Money Transportations It is not developed Control Labor relations Always a problem of workers

Collective bargaining, layoff Layoff of workers often not possible; participation in management; workers may seek change through political process rather than collective bargaining

b/ Strategies for Coca Cola Company From these four strategies Coca-Cola Company follow the Multidomestic strategies. They produce their products independently in different countries. All countries product are not same. They produce their products by following different strategy for different countries, based on the internal and external environment of the country. Coca- Cola Company developed their strategy by considering the nature of the people of different countys people, culture, status and so many other related factors. Behind the reasons of following of this strategy may be that, different countries economies of scale for production, distribution, and marketing are low, side by side cost of coordination between the parent corporation and its various foreign subsidiaries is high. Because each subsidiary in a multi-domestic corporation must be

responsive to the local market, the parent company usually delegates considerable power and authority to managers of its subsidiaries in various host countries. Levels of Strategies followed by Coca-Cola Company There are three levels of strategies followed by Coca-Cola Company. This may be stated as the following Figure: Levels of Strategies

Corporate Level Strategy Corporate level strategy attempts to define the domain of business the firm

intends to operate. Corporate level strategy fundamentally is concerned with the selection of businesses in which the company should compete and with the development and coordination of that portfolio of businesses. A firm might adopt any of three forms of corporate strategy: o A single business strategy o Related diversification strategy and o Unrelated diversification strategy. Coca-Cola Company follows related diversification strategy that is calls for the firm to operate in several different but fundamentally related businesses. Each of its operations linked to the others Coca-Cola characters, the Coca-Cola logo, and a theme of wholesomeness and a reputation for providing high quality family products. Coca-

Cola Company follows this strategy because it has several advantages. At first, the firm depends less on a single products so it is less vulnerable to competitive or economic threats. Secondly, related diversification may produce economies of scale for a firm. Thirdly, related diversification may allow a firm to use technology or expertise developed in one market to enter a second market more cheaply and easily. Corporate level strategies of Coca-Cola Company is following Business Unit Level Strategy A strategic business unit may be a division, product line, or other profit center that can be planned independently from the other business units of the firm. Corporate strategy deals with the overall whereas business strategy focuses on specific business, subsidiaries or operating units within the firm. Business seeks to answer the question how should we compete in each market we have chosen to enter? The firms develop unique business strategy for each of its strategic business units, or it may pursue the same business strategy for all of them. The three basic business strategy are differentiation, overall cost leadership and focus. Coca-Cola Company uses the differentiation strategy effectively. Functional Level Strategy The functional strategies attempts to answer to question How we manage the function? The functional level of the organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to business processes and the value chain. Functional level strategies in marketing, finance, operations, human resources, and R&D involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively. Functional units of an organization are involved in higher level strategies by providing input into the business unit level and corporate level strategy, such as providing information on resources and capabilities on which the higher level strategies can be based. Once the higher-level strategy is developed, the functional units translate it into discrete action-plans that each department or division must accomplish for the strategy to succeed.