2. Research Question
How do product strategies change
when ICT companies move from
international to global and why?
3. 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
4. Going Global: “Globalizing internationals”
Entry Phase
•Primarily serve
domestic Market
International
Market Phase
•Expansion toward
higher foreign
markets within
domestic continent
•>50% of sales
outside home
country
Global Market
Alignment Phase
•Expansion toward
foreign continents
•>50% of sales
outside domestic
continent
•Global target
market &
Alignment of
activities across
countries
7. Product Strategy Dimensions
Width of product assortments
number of product lines
Length of product line
number of products in a line
8. Product Strategy Dimensions
Specific product
category
goods, services, knowhow, 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
Individual
Products
9. Product strategy standardization
alternatives
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
greatest
common
denominator
optimized set of
function and
features
cost advantage and
leverage of R&D
Less adaptation
(common product
platform BUT
adaptation of some
features)
10. 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 Tecnomen
o Represents two-thirds of the Finnish ICT equipment exports
o EU member countries considered domestic continent
14 interviews lasting 2-4 hours (with managing directors or senior
vice presidents of marketing)
12. 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
13. FACTORS AFFECTING PRODUCT STRATEGY
ALTERNATIVES
Impact of macro and industry environment
P1 Greater standardized product strategy occur when:
Favourable global trade liberalization and regional integration
High technological advances
Decline 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
14. Validation of P1
Impact of macro and industry environment
Nokia mobile phones (NMP)
Nokia networks (NET)
Salcomp
Tecnomen
Global technology standard
Costumers need more similar
Relatively fragmented
technology standard
15. FACTORS AFFECTING PRODUCT STRATEGY
ALTERNATIVES
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
• Country-specific product lines
and variants
• Standardization process low
• Strive for co-ordination and
standardization of product lines
on a global basis
•Global or regional products
platforms
•Similar length of lines and
positioning
•Individual Products standardized
at different level
16. Validation of P2
Impact of corporate and business level strategies
Managerial orientation
Nokia mobile phones (NMP)
Nokia networks (NET)
Ethnocentric polycentric
regiocentric geocentric
Product strategy development
when penetrating countries
outside domestic continent
SPS
Managerial orientation
Salcomp
Tecnomen
Ethnocentric polycentric
regiocentric
Product strategy development
when penetrating countries
outside domestic continent
MPS
17. FACTORS AFFECTING PRODUCT STRATEGY
ALTERNATIVES
Impact of corporate and business level strategies
P3 Greater standardized product strategy occur when:
Higher centralization of production and marketing operations globally
18. Validation of P3
Impact of corporate and business level strategies
Nokia mobile phones (NMP)
Salcomp
Tecnomen
Decentralization
Marketing Operations
Sales
Production
(NMP centralized production)
Centralized
Nokia networks (NET)
Marketing Operations
Sales
Production
(NMP centralized production)
19. FACTORS AFFECTING PRODUCT STRATEGY
ALTERNATIVES
Impact of internal strategy levers, resources, capabilities and decisionmaking 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
20. Validation of P4partially
Impact of internal strategy levers, resources, capabilities and decision-making
variables
Nokia mobile phones (NMP)
Nokia networks (NET
Salcomp
Tecnomen
Economies of scale and learning
important
Global capabilities developed
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
21. FACTORS AFFECTING PRODUCT STRATEGY
ALTERNATIVES
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
22. Validation of P5
Impact of decision making
Nokia mobile phones (NMP)
Nokia networks (NET)
Introduction of new advanced
product categories
Tecnomen
Salcomp
Widening the offering to new
customer segments
24. 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
25. 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)
26. 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
Think locally
but act globally
Learn nuances within markets (e.g.
cultural differences) Hire local
resources
Establish a regional structure
Completely integrate operations
27. 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 = $$$$$$$$$$
Hinweis der Redaktion
For Globalizing Internationals the study meant those companies who have first become international and then implemented a global strategy.This process is made of 3 different phases:Entry Phase the company focuses on serving solely its own domestic marketInternational Market Phase the company expands towards other countries in its continent international company = +50% sales outside its home countryGlobal Market Alignment phase the firm expands beyond the home continent confines towards other continents globalized international = +50% sales outside home continent target market = the globe alignment of activities across countries and continents
Product strategy and standardization can be applied at 3 different levels:Product platform levelProduct line levelIndividual products level
For what concerns the Product platform level, a product platform can be defined as a common structure from which a family of products is built over time.Product platform is typically standardized when a firm is willing to implement a Modified Product Strategy. In this case a common standardized product platform is used globally to then develop different products whose features are adapted to the market needs and requirements.
Talking about the product line implies making decisions concerning the width of product assortments = number of product linesthe length of each single product line = number of products in a line. These two measures(width and length) tend to increase when, after implementing a global strategy, a firm gains greater business experience and resource commitment.
Individual products which can be a good, service, know-how or system, instead, can be seen as further divided into 3 groups of attributes:Core product if standardized provide greatest cost advantages, but their standardization depends on the type of market and on the type of productActual product which are the interpretative elements of a product and are often the most standardized (e.g. brand image, product quality)Augmented product these attributes are the most difficult to standardize as they are more dependent on culture and performed in direct relation to local customers
The study identified 3 main alternative ways of standardizing a product for globalizing internationals:Localized product strategy greatest extent of adaptation to market requirements but least cost efficiency (very expensive for ICT companies who have to sustain enormous R&D costs)Modified product strategy middle extent of standardization in which firms standardize the product platform but still adapt some of the products features. Some cost advantages and leverage of R&D are gained (better exploitation of the R&D).Standardized product strategy highest extent of product standardization. The product is fully standardizes with no adjustment to local needs The product developed consists of either the greatest common denominator or an optimized set of functions and features. Highest cost efficiency and R&D leverage are gained.
The research was conducted in 2001. It consisted of a qualitative multiple-case study that aimed at testing 5 theoretical propositions.In the sample 4 Finnish ICT equipment companies from Small and Open Economies were included. Nokia Mobile Phones, Nokia Networks (now renamed Nokia Solutions and Networks – joint venture between Nokia and Simens), Salcomp and Tecnomen (now renamed Tecnotree after the merge with the Indian company Lifetree). These companies represent 2/3 of the Finnish ICT equipment exports.14 interviews were conducted with managing directors or senior vice presidents of marketing of the 4 companies.
the study develop5 main propositions assessing the factors that are most likely to affect companies' product strategy development toward globalization. The validity of these proposition are tested against the product strategy development of the 4 Finnish ICT companies.
For the time-period considered by the study, we can see that the 4 companies have evolved differently.
According to the p1 the macro and industry env have an impact on the globalization process. It is assumed that a great standardized product strategy is employed when tariff and non tariff barriers in the industry are rather low favouring a free exchange of goods between countries. Technological advances ease the standardization of products for example the advent of Internet considerably decreased the distance between companies and consumers, making consumers always more aware of foreign products.Standardized product can be further developped when markets accross countries have similar needs or when a dominant design for the technoly emerges.
This P is confirmed as exemplified by the 4 companies, in markets where a global technology standard was present and consumer needs were more similar such as that of NMP and NET a more standardized product strategy was implemented whereas where the technology standards were still relatively fragmented such as for Salcomp and Tecnomen markets a modified product strategy was selected
According p2 the managerial orientation of the company has an important influence on the choice of the product strategy. For example ethnocentric companies consider international operation secondary and always supply the domestic market first. while geocentric are more open to global marketing But recognize the importance of regional marketing strategies to meet customers’ needs.Where the company is positioned in the market development phase affect the product strategy. In an entry phases products look to satisphy the domestic market need. HWV when companies start moving from international to global with respect of their geographical locations, they shift toward a more globalized products.
In all 4 cases , when the management orientation evolved towards the geocentric and the companies started to penetrate counties outside the domestic continent, the product strategies developed towards higher standardization across countriesNMP & NET internationalized first and then globalized entering NA and Asia Salcomp >> Spain, Italy, Germany in EU localised product strategy used > when penetrate NA and Asia start to eveolved toward modified product strategy based on global products platform across countriesTecnome when 90%of sale from EU e 10% outside > start globalizing penetrating, China Brazil, Indonesia Thailand > in 2001 51% of sales outside EU
P3. The higher the centralization of production and marketing operations globally, the greater the use of more standardized product strategies compared with adapted ones (which instead closeness to markets > provides a better opportunity to take into account the different requirements of the markets)
This proposition has been validated by the study. Analysis of the case companies revealed that they had moved toward a lower centralization of production (except one case, NET) and all had moved towards lower centralization in marketing operations, and yet increasingly standardized their product strategy. Whathasbeenshownisthatthose companies weredecentrlizingboth productions and marketing operations to have a bettercontact with the target market’s consumers.
The 4th pconsiderexperienceeffectssuchaseconomies of scale and building gloalcapabilitiesnecessary for applying a more standardizedproductstrategy. While on the otherhandeconomies of scope and localcapabilitiesfavour a modifiedproductstrategy
This proposition has been partially validated. The evolution of the 4 companies shows that the economies of scale as well as global capabilities induce a more standardized product strategy. However, when a more adaptive product strategy such that of Salcomp and Tecnomen is applied both economies of scope and scale and local and global capabilities are necessary.
P5tests the impact of decisionmaking and business experience on the globalization and standardizationprocess. The study shows thatwhen global business experience (thusrisk and uncertaintyisreduced) and resourcecommitmentincreasefirms are capable of deveoping a widerstandardizedproductassortment and more advancedstandardizedproductcategories.Whenthereislack of experience in developing global products, lack of resources and a culture of high uncertaintyavoidance, thenadaptationisimplemented.
P5 is validated as 3 out of 4 companies going global have developed new advanced standardized product categories thanks to their increased global business experience and resource commitment.Even Salcomp can be seen as supporting the validation of P5 as it didn’t make changes to the product category or assortment but it widened the offering to new customer segments.
Now Nik will present how the globalized world has evolved in the present days since the research has been done and the implications of this evolution on the ICT industry.OR: Nik will now discuss the implications of globalisation on the ITC industry in contemporary times