PRODUCT STANDARDIZATION CASE_week8

Globalizing internationals: product strategies of ICT manufacturers

Maria Vittoria Antonacci

Federica Furlan

Nikola Gak

International Marketing Week 8

Research Question

How do product strategies change when ICT companies move from international to global and why?

Trends in the Globalized World

Markets liberalization

Potential for experience effects (i.e. scale effects, learning by doing, technological advances, economies of scope)

Development of international standards (e.g. technical standards and dominant designs)

Emergence of global customers (developed countries vs emerging markets)

Increased competition

Going Global: “Globalizing internationals”

Entry Phase International Market Phase

Global Market Alignment Phase

• Primarily serve domestic Market

• Expansion toward higher foreign markets within domestic continent

• >50% of sales outside home country

• Expansion toward foreign continents

• >50% of sales outside domestic continent

• Global target market & Alignment of activities across countries

INTERNATIONALIZATION GLOBALIZATION

Product Strategy Dimensions

Product Line

Individual

Products

Product Platform


Product Line

Individual

Products

Product Platfor

m

Common structure from which a family of products is built over time


Product Line

Individual

Products

Product Platform

Width of product assortments number of product lines

Length of product line number of products in a line


Product Line

Product Platform

Individual

Products

Specific product category

goods, services, know-how, or systems

Content Core product

performance, technology, and the main functional features

Actual product brand name, packaging, features, styling, and quality

Augmented product additional services and benefit

Product strategy standardization alternatives

Localised Product Strategy

Modified Product Strategy

Standardized Product Strategy

adaptation to market requirements

inefficient, high R&D costs in ICT

highest leverage in R&D, viable when products require relatively fewer or no modifications no adjustment to local needs

cost advantage and leverage of R&D

Less adaptation (common product platform BUT adaptation of some features)optimized set of

function and features

greatest common

denominator

Research Design

Methodology Qualitative Multiple-Case Study conducted in 2001 5 Theoretical Propositions

Sample 4 Finnish ICT equipment companies from SMOPECs: Nokia

mobile phones (NMP), Nokia networks (NET), Salcomp, and Tecnomeno Represents two-thirds of the Finnish ICT equipment exportso EU member countries considered domestic continent

14 interviews lasting 2-4 hours (with managing directors or senior vice presidents of marketing)

Propositions and Validity Test

Evolution of Finnish ICT firm's product strategies

Nokia mobile phones (NMP)

Nokia networks (NET)

Salcomp

Tecnomen

Evolved form Localized to Standardize Product Strategy

Evolved form Localized to Modified Product Strategy using Standardized Product Platforms

Impact of macro and industry environment

FACTORS AFFECTING PRODUCT STRATEGY ALTERNATIVES

P1 Greater standardized product strategy occur when:

Favourable global trade liberalization and regional integration

High technological advancesDecline of transportation and communication costs Decrease distance between consumers and companies Easier business activities

More similar markets need across countries

Intense Competition companies operate on a global scale

Technical standardization and dominant design

Validation of P1Impact of macro and industry environment



Salcomp

Tecnomen

Global technology standard Costumers need more similar

Relatively fragmented technology standard

Impact of corporate and business level strategies


P2 Greater standardize product strategy & product management processes occur when:

Managerial orientation shift toward foreigners, ideas and resources affect product strategy

Ethnocentric, Polycentric, Regiocentric, Geocentric

Shift across market development phases

Initial Entry

• Country-specific product lines and variants

• Standardization process low

International market phase

• Strive for co-ordination and standardization of product lines on a global basis

Global market alignment phase

•Global or regional products platforms

•Similar length of lines and positioning

•Individual Products standardized at different level

Validation of P2Impact of corporate and business level strategies



Ethnocentric polycentric regiocentric geocentric

when penetrating countries outside domestic continent

SPS

Managerial orientation

Product strategy development

Ethnocentric polycentric regiocentric

when penetrating countries outside domestic continent

MPS

Managerial orientation

Product strategy development

Salcomp

Tecnomen

Impact of corporate and business level strategies


P3 Greater standardized product strategy occur when:

Higher centralization of production and marketing operations globally

Validation of P3Impact of corporate and business level strategies


Salcomp

Tecnomen

Marketing OperationsSales

Production(NMP centralized production)

Decentralization

Marketing OperationsSales

Production(NMP centralized production)

Centralized


Impact of internal strategy levers, resources, capabilities and decision-making variables


P4 Greater standardize product strategy occur when:

High economies of scale investments in R&D and product development are often high in ICT equipment companies, it is therefore extremely important to spread the development costs over the maximum volume of sales from global markets

Global capabilities developed when valuable, rare, imperfectly imitatable and non-substitutable resources are available

While modified product strategy favourable when:

Economies of scope (joint production of several products) If strong scope economies are present it may be beneficial to adapt the product to meet the market requirements from different markets

Optimize scale production difficult Local capabilities

Validation of P4partiallyImpact of internal strategy levers, resources, capabilities and decision-making variables


Nokia networks (NET

Economies of scale and learning important Global capabilities developed

Salcomp

Tecnomen

Both Economy of scale and scope AS simultaneously adapt the products based largely on customer needs, but also manufacture these in high volumes at low cost. Both local and global capabilities

Impact of decision making


P5 Increased global business experience and resource commitment favour:

Wider product assortment Bigger proportion of services, know-how, systems More advanced product categories While factors leading to adaptation Lack of experience leading of developing global products Lack of resources High uncertainty avoidance

Validation of P5Impact of decision making



Tecnomen

Introduction of new advanced product categories

Widening the offering to new customer segments Salcomp

Implications of Globalisation on the

ITC industry in Contemporary Times

Emerging Markets

Growth Potential

Emerging markets growth exceeds that of developed markets

Emerging economies will account for 70% of global growth from 2010 to 2020 (Forbes)

ICT in Emerging Markets

ICT services stimulate global growth in emerging markets Indicators of economic development

Firms using ICT see faster sales growth, higher productivity and faster employee growth E.g.: During economic recession, Brazil invested heavily in technology; helped recovery, and now accounts for nearly half of all IT spending in South America

Evolution of Technology

Helps open new markets

Dissolving trade borders

Technology creates opportunities

Global middle class will grow from 430 million in 2000 to 1.2 billion by 2030 (World Bank)

ICT Challenges in Emerging Markets

Emerging markets: highly lucrative but present challenges Infrastructure availability, regulatory requirements, culture and politics may vary

Local presence/partners = Better business Can help with regulation (e.g. China) and cultural differences

‘One-size-fits-all’ strategy

Market nuances usually exist between corporate headquarters and its operational regions

Evaluate the market carefully

Learn nuances within markets (e.g. cultural differences) Hire local resources

Establish a regional structure

Completely integrate operations

Think locally but act globally

A Vision for Borderless Markets

Higher availability of tech services = Flattening of IT sophistication, infrastructure availability, and user adoption

Must always address cultural discrepancies

Analyse markets carefully + maintain reliable ICT services + establish strong local partnerships = $$$$$$$$$$