Integration-Responsiveness Framework

12. Determining the level of integration and responsiveness 12.1

Integration-responsiveness framework

Global Transnational strategy strategy high

Level of global integration Multinational strategy low

low high Level of local responsiveness (adapted from Bartlett/Ghoshal/Beamish, 2008)

1. Analyzing the industry forces

2. Determining the managerial preferences

3. Determining level of global integration and local responsiveness

Business, business unit and business field

Business .Market offer .which can be distinguished from other market offers and .contributes critically to the success of the company.

Business unit Business field .Business .Business .which shares a market with .which does not significantly other businesses and/or share its market with other .which shares important businesses and resources with other .which does not share businesses important resources with other businesses

Business units as parts of business fields

A B B1 B2 A1 A2

A3 B3 B4

C1 C2 D = Business fields = Business units = Strong interdependencies = Weak interdependencies

Process for defining the strategic businesses

1. Defining the strategic business units

2. Defining the strategic business fields

Business structure of Ricola Switzerland Germany France US … Hard herb drops Soft herb drops

Instant tea Teabags Chewing gum

= Business unit = Business field

(adapted from Thahabi, 2010)

© 2012 R. Grünig/D. Morschett 13. Defining the strategic businesses 13.5 Patterns of strategic businesses where countries are the competitive arenas Business units based on R = Region countries and industry segments C = Country I = Industry R1 R2 S = Industry segment

C11 C12 C11 C12 = Business unit = Business field

S11

I1 S12

S22 I2 S22

Business fields based on Business fields based on Business fields based on No business fields regions and industries regions industries

R1 R2 R1 R2 R1 R2 R1 R2

C11 C12 C11 C12 C11 C12 C11 C12 C11 C12 C11 C12 C11 C12 C11 C12

S11 S11 S11 S11

I1 I1 I1 I1 S12 S12 S12 S12

S22 S22 S22 S22 I2 I2 I2 I2 S22 S22 S22 S22

© 2012 R. Grünig/D. Morschett 13. Defining the strategic businesses 13.6 Patterns of strategic businesses where the world market is the competitive arena Business units based on R = Region industry segments C = Country I = Industry R1 R2 S = Industry segment

C11 C12 C11 C12 = Business unit = Business field

S11

I1 S12

S22 I2 S22

Business fields based on No business fields industries

R1 R2 R1 R2

C11 C12 C11 C12 C11 C12 C11 C12

S11 S11

I1 I1 S12 S12

S22 S22 I2 I2 S22 S22

Industry markets

Categories Country of objectives markets

Value chain Industry level segments

Possible strategic objectives

Company objectives .Cash flow and free cash flow .ROS, ROI and ROE .Growth .Ability to innovate .Reputation with stakeholders

Strategic business Objectives for Sourcing objectives operation units objectives .Market positioning .Quality .Quality .Competitive .Output .Quantities advantages .Costs .Costs .Unit sales .Capacity .Revenue .Market share .Contribution margin

Process of defining strategic objectives

= usual 1. Identifying businesses and operation units which need strategic sequence objectives of steps = most important possible 2. Defining the categories of objectives loops

3. Fixing the values of the objectives

4. Checking for consistency

5. Producing a list of objectives

Businesses of FFA

Austria Germany China Indonesia

Product group A1

Product group A2

Product group B

Product group C

= Existing business unit = Planned business unit = Business field

Contribution margin and cash flow definition for FFA Revenue ./. Cost of raw materials and components = Contribution margin 1 ./. Direct production cost ./. Sales cost = Contribution margin 2 ./. Fixed cost of the factory/factories * ./. Overhead cost of the business field * = Contribution margin 3 ./. Overhead cost of the company * = Cash flow ./. Investments = Free cash flow

* = without amortisations and depreciations

Strategic objectives of FFA

Business objectives Factory objectives Businesses Years Turnover Contribution Contribution Factories Products Years Output Direct Fixed margin margin cost cost 2 3 per unit A1 Austria 20xx 6 3 — 20xx + 1 6 3 — A1 Austria A11 … … … 20xx + 2 6 3 — … 20xx + 3 6 3 — A12 … … … A2 China A21 … … … 20xx + 4 6 3 — … A2 Austria 20xx 10 3 — A22 … … … 20xx + 1 10 3 — B Czech B1 … … … 20xx + 2 10 3 — B2 … … … … 20xx + 3 10 3 — Republic CAustria C1 … … … 20xx + 4 10 3 — … A2 China 20xx 15 3.8 — C2 … … … 20xx + 1 16 4 — Sourcing objectives 20xx + 2 17 4.3 — Products Raw materials Years Quantities Cost per unit 20xx + 3 18 4.5 — and 20xx + 4 19 4.8 — components A2 Indonesia 20xx 0 0 — A11 A111 … … … 20xx + 1 0 0 — A112 … … … 20xx + 2 2 0.4 — A12 A121 … … … 20xx + 3 2.5 0.6 — A122 … … … 20xx + 4 3 0.8 — A21 A211 … … … A Total 20xx 31 9.8 5.2 A212 … … … 20xx + 1 32 10 5.4 A22 A221 … … … 20xx + 2 35 10.7 5.9 A222 … … … 20xx + 3 36.5 11.1 6.3 B1 B11 … … … 20xx + 4 38 11.6 6.8 B12……… BAustria………— B2 B21 … … … B Germany … … … — B22……… B Total 20xx 20.5 6.8 2.5 C1 C11 … … … 20xx + 1 21 7 2.5 C12……… 20xx + 2 21.5 7.2 2.6 C2 C21 … … … 20xx + 3 22 7.4 2.6 C22……… 20xx + 4 22.5 7.6 2.7 Company objectives CAustria………— Years Turn- Contribution Cash Free cash C Indonesia … … … — over margin 3 Flow flow Figures in millions C Total 20xx 8.5 2.8 1.9 20xx 60 9.6 3.6 2.6 of EUR 20xx + 1 9 3 2.1 20xx + 1 62 10 4 0.8 — = not possible to 20xx + 2 11.5 3.3 2.3 20xx + 2 68 10.8 4.6 3.4 calculate at this level 20xx + 3 12.5 3.8 2.8 20xx + 3 71 11.7 5.5 4.3 … = not displayed to 20xx + 4 13.5 4.5 3.5 20xx + 4 74 13 6.8 5.6 shorten the figure © 2012 R. Grünig/D. Morschett 15. Determining the level of standardization and differentiation of market offers 15.1

Interdependencies between marketing in different countries

Foreign country A Foreign country B

Company Company

Competitors Government Competitors Government

Customers Customers

Home country

Company

Competitors Government

Customers

© 2012 R. Grünig/D. Morschett 15. Determining the level of standardization and differentiation of market offers 15.2 Standardization, differentiation and types of international marketing Ethnocentric marketing

Internationally Locally standardized adapted marketing marketing

Global marketing

© 2012 R. Grünig/D. Morschett 15. Determining the level of standardization and differentiation of market offers 15.3 Availability of selected car models of Volkswagen in different countries Country Model Germany USA India Brazil Japan Gol x Golfxx xx Golf GTI x x x x Touran x x Fox x x Scirocco x x Sharan x x Polox xxx Vento x Eos x x Jetta x x x (x) Voyage x Passat / CCxxxxx Routan x Tiguan x x x x Touareg xxxxx New Beetle x x x Phaeton x x

The brand structure of Anheuer-Busch InBev

Brand type Brands

Global brands Budweiser, Stella Artois, Beck’s

Multi-country Hoegaarden, Leffe brands Examples of USA: Michelob, Bud Light local Argentina: Quilmes brands Belgium: Jupiler Brazil: Skol, Antarctica China: Sedrin, Harbin Germany: Diebels, Franziskaner Russia: Bagbier UK: Bass, Whitbread

Process for determining the product and brand portfolio

1. Analyzing the market needs in the foreign market

2. Determining which product/brands from the existing portfolio fit the demand in the foreign market

3. Analyzing the benefits and costs of modification of products/ brands from the existing product portfolio for the foreign market

4. Analyzing the benefits and costs of developing specific products/brands for the foreign market

5. Determining which products/brands from the foreign market are suitable for introduction in the home market

© 2012 R. Grünig/D. Morschett 15. Determining the level of standardization and differentiation of market offers 15.6 Product and brand portfolio in the foreign market and the home country during the process Home Foreign country market Step 1

Step 2

Step 3

Step 4

Step 5 = Home country product = Modified home country product = Host country product

Segmentation methods

International segmentation: Integral segmentation: Identifying country clusters Identifying cross-country customer segments

A B C D E F A B C D E F

A-F = Countries = Segments

Culture-boundedness of different product categories

Culture-free Computer (hardware) "High tech" High Cameras Heavy machinery Machine tools Consumer Electronics Software Durable domestic goods (e.g.appliances) Wine and spirits Cultural Soft drinks Standardization dependency Tobacco, cigarettes potential Paperware Cosmetics Beer Detergents Publications/media Food Culture- Confectionary bound Clothing Low

(Müller/Gelbrich, 2004)

© 2012 R. Grünig/D. Morschett 15. Determining the level of standardization and differentiation of market offers 15.9 Process for determining the level of standardization and differentiation of market offers = usual 1a. Analyzing all present and 1b. Considering the level of integration sequence intended markets of the company and responsiveness of steps = most important 2. Deciding between the options of full standardization or willingness to adapt to local possible loops markets If standardization If differentiation If differentiation If standardization 3b. Identifying cross-country segments 3a. Identifying country clusters and deciding upon segment specific offers

4a. Determining the product and brand 4b. Determining product brand portfolio portfolio for each country group

5a.Determining the marketing 5b.Determining the marketing mix for each country group mix

6. Planning the implementation

Basic types of production configurations

International splitting of production No international splitting International splitting process

Number of production location Parallel production Cross-border production II

A1 A2 A3 A A1 A2 A Decentralization B1 B2 B3 B B2 B3 B C1 C2 C3 C C1 C3 C H1 H2 H3 H H2 H World market factory Cross-border production I A A Concentration B B2 B C C1 C H1 H2 H3 H H3 H

H = Home countries = production steps = one production location A, B + C = Host countries = sales = different production locations 1, 2 + 3 = Production steps (adapted from Knüppel, 1997; Kutschker/Schmid, 2011; Morschett/Schramm-Klein/Zentes, 2010) © 2012 R. Grünig/D. Morschett 16. Configuring the value creation process and determining the operation modes 16.2

Configuration of PrecIn GmbH

Mexico China = Production plant = Wholly-owned sales unit = Sales joint venture or partially owned sales unit = Independent distributor = Flow of finished products = Flow of components

Process for developing an operations strategy

= usual 1. Determining the product and country markets included in the sequence operation strategy of steps = most important 2. Analyzing the current value creation process and operation modes possible loops

3. Forecasting the future demands for the products in the different markets

4. Determining the future configuration of the value creation process

5. Determining the future operation modes

6. Estimating the cost of transformation from the current to the target situation

Process of strategic planning in an international company

= usual 0. Preparing the strategy planning project sequence of steps rg = most 1. Carrying out strategic analyses important possible 2. Revising or producing loops the mission statement

3. Developing the corporate strategy

4. Developing the business strategies

5. Developing the functional strategies

6. Determining the implementation programs

7. Final assessment of strategies and implementation

8. Formulating and approving the strategic documents

(adapted from Grünig/Kühn, 2011)

Fields of analysis for FFA

Countries Global Industry Company environ- markets ment A B C Sales Produc- Comp. in tion general

Austria e e e e e e e

Germany e e e e

Czech Rep. e

China e e e e

Indonesia p p p p

World e e e e

= main analysis field = additional analysis field e = existing market or resources p = potential market or resources

Table of contents of a mission statement

1. Corporate identity / raison d'être of the company 2. Overriding objectives and values 3. Areas of activity 4. Relation to specific stakeholder groups 5. If any: Principles governing specific tasks

(adapted from Grünig/Kühn, 2011)

Table of contents of a corporate strategy

1. Level of integration and responsiveness 2. Strategic businesses 3. Strategic objectives 4. If needed: Level of standardization and differentiation of market offers

5. If needed: Configuration of the value creation process and operation modes 6. Required business strategies and functional strategies

© 2012 R. Grünig/D. Morschett 17. The process of strategic planning in an international company 17.5 Business field patterns in international companies and their drivers Competitive Country markets as World market as Level of arena competitive competitive arena integration and arenas responsiveness Multinational . Business fields according strategy to regions and industries . Business fields according to regions Transnational . Business fields according strategy to industries . No business fields

Global . Business fields according . Business fields according strategy to industries to industries . No business fields . No business fields

Businesses of FFA

Austria Germany China Indonesia

Product group A1

Product group A2

Product group B

Product group C

= Existing business unit = Planned business unit = Business field

Target Boston Consulting Group portfolio for FFA

Real market 10% A2 = current turnover growth Indonesia = target turnover in four years C 8% Indonesia

6% A2 China 4%

C 2% Austria B Germany A2 0% Austria B A1 Austria Austria Relative -2% market 0.25 0.5 12 4 share

Table of contents of a business field strategy

1. Strategic objectives 2. Generic business strategy 3. If needed: Standardization and differentiation of the market offers 4. Competitive advantages of the market offers 5. Strategy of business unit A 6. Strategy of business unit B 7. Competitive advantages of resources and processes 8. If needed: Operations strategy

Generic business strategies

Competitive advantage Lower Product and price image advantages

Whole 1. Broad scope 2. Broad scope market price strategy differentiation strategy Scope of market

Niche 3. Niche focus 4. Niche focus market price strategy differentiation strategy

(adapted from Porter, 1980)

Competitive advantages of the pocket knives of Victorinox • Top quality products • Multifunctional products • Broad range of traditional and innovative pocket knives • Uniform product design • Swiss cross emphasizing Swissness • Well-known brand

Strategic programs of FFA

Corporate level Business field A Business field B Business field C

Building up a sales Introduction of product Replacing the sales Introduction of product subsidiary in Indonesia* group A2 in Indonesia representative in group C in Indonesia Germany by a sales subsidiary Introduction of a holding Entering central and Marketing campaign Building up logistics for structure western China with in Germany Indonesia* product group A2

Building up logistics for Implementing Indonesia* rationalizations in the Czech factory

Building up logistics for central and western China

Shifting production steps for product group * = Must be coordinated A1 from Austria to with each other China

Strategic documents of FFA

Mission statement

Corporate strategy

Business field Business field Business field strategy A strategy B strategy C

Operations strategy A

Implementa- Implementation Implementa- Implementa- tion programs programs tion programs tion programs