p&g internationalization strategy
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STRATEGY & STRUCTURE
Strengths and Weaknesses of the Multinational Enterprises’ strategies
Anne-Charlotte Bazoud
Gabrielle Colombier
Franziska Guehlcke
Marcus Bormann
Arnaud Katz
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Structure
I. Context
II. Aims – Objectives
III.Strengths and Weaknesses of the strategies adopted by MNEs
IV.Case study: Procter & Gamble
V. Managerial implications
VI.Conclusion
VII. Sources
I. Context
To be successful in an increasingly globalised
world, companies have to enter into new
foreign markets and to adapt their strategies.
II. Aims - Objectives
Objectives
Describe the international, multi-domestic, global and transnational strategies with practical examples
Show the strengths and weaknesses of each strategy
Illustrate the theories by describing P&G’s strategy
Aim
Identify and analyse the different strategies adopted by MNE’s to coordinate the international operations
III. Strengths and Weaknesses
of the strategies adopted by MNEs
Typology of strategies
EfficiencyResponsivenessLearning
Efficiency
Learning Responsiveness
Typology of strategies
LEARNING
International strategy
« Miniature replica » of
parent
Centralised decision making
I.E. Hilton Carrefour
Production andmarketing function in
each host
“ Trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies. ”
Typology of strategies
International strategy
WEAKNESSESSTRENGTHS
• Facilitates transfer of core competencies
• Moderation of operational costs
• Great amounts of profits
• No integration economies
• Little local responsiveness
Typology of strategies
EFFICIENCY
Global strategy
Centralised decision making
Global integration
I.E. Standardized product The wireless industry, the credit card industry (American Express)
Dispered value/supply
chain
“ Strategy focusing on increasing profitability by reaping cost reductions from experience curve and location economies. ”
Typology of strategies
Global strategy
WEAKNESSESSTRENGTHS
• Strong production orientation
• Scale economies
• Creation of a “virtuous circle”
• Lacks local responsiveness
• No customization of the product
Typology of strategies
RESPONSIVENESS
Multi-domestic strategy“Strategic and operating decisions are decentralized to Strategic Business Units in each country to allow products to be tailored to the local
market.”
De-centralised decision making
Local operations
I.E. Johnson & Johnson
Typology of strategies
Multi-domestic strategy
WEAKNESSESSTRENGTHS
• Difficulty in transferring knowledge across countries
• High costs (tailored products + duplication of resources)
• Control and coordination problems
No global efficiency
• Ability to adapt products to local market conditions
Strong marketing orientation
Locally responsive
Typology of strategies
Transnational strategy
EFFICIENCYRESPONSIVENESS
LEARNING
“A combination of the multi-domestic and global strategies. Firms seek to
achieve both global efficiency and local responsiveness.”
Joint decision making
Dispersed value chain
Flexibility
I.E. Verifone, a subsidiary of Hewlett-Packard
Typology of strategies
Transnational strategy
WEAKNESSESSTRENGTHS
• Difficulty to implement this strategy (complex structure)
• Ability to adapt to local market
•Ability to attain economies of scale
• Ability to increase learning
Global competitiveness
IV. Case study: Procter and Gamble
Case study: Procter & Gamble
Founded: 1837
Headquarters: Cincinnati, Ohio, USA
Chairman and CEO: A.G. Lafley
Products: consumer goods
Slogan: “Touching lives, improving life”
Employees: 138 000 worldwide
25th largest US company by revenue, 81th in the world (2006)
Procter & Gamble Presentation
Case study: Procter & Gamble
Procter & Gamble products
Three categories:
Beauty
Household Care
Health & Well-Being
I.E.
More than 250 brands, including 23 brands which have
more than a billion dollars in net annual sales
Case study: Procter & Gamble
P&G’s strategies
Case study: Procter & Gamble
Long time to internationalize: almost 100 years before P&G undertook operations internationally
1930: P&G began to sell its products overseas (International Strategy)
1950’s: P&G focused on the largest emerging market in the world (China…) with a multi-domestic strategy
1980’s: P&G chose to benefit from the large experience of the company (more than a century) by using a transnational strategy
International expansion of Procter & Gamble
Case study: Procter & Gamble
Strengths of P&G’s international strategy
Ability to respond effectively to the new and complex demands of their international business environments (emerging markets…)
Ability to attain economies of scale
Ability to increase learning
Global competitiveness
Case study: Procter & Gamble
Weaknesses of P&G’s transnational strategy
Time: The transnational strategy is not easy to build and
the history of P&G shows that the transition from a strategy
to a transnational strategy requires time.
Management: There were also big managerial challenges
for Procter & Gamble in order to have a transnational strategy
A transnational strategy confronts managers to three
main challenges:
Coordinate the decision making between each subsidiary
and the parent company
Transfer knowledge
Set up a strong marketing strategy which meets the local
customers’ requirements
V. Managerial implications
VI. Conclusion
The strategy’s choice depends on the industry
or the product.
This strategy is not static
VII. Sources
Procter and Gamble’s website : www.pg.com
John D. Daniels, Lee H. Radebaugh, Daniel P.
Sullivan, (11th Edition, 2007), International Business:
environments and Operations
Bartlett & Ghoshal, (1998), Managing Across Borders:
The Transnational Solution
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