Global Integration
Discuss about the Future Health Of Multinational Corporation Is Debatable.
With the increasing demands with regards to economic nationalism has triggered many observers to reveal that the aspect of globalization is not only a retreat affair but also a timely death.to be precise and to the point, issues such as the Brexit vote and the election of Donald Trump has led to important questions being raised about the potential of free trade (Gupta & Wang, 2016). However, the future health of a multinational corporation is debatable. The outlook of multinational corporation looks good but MNCs have to adopt some new strategies in coping future changes.
Assuming the notion that globalization is on life support is put to rest, any other measure employed than trade in merchandise seems fulfilling (Ruggie, 2017). Any decline in the trade of merchandise dominates any changes that may be initiated in sentiments that are political.
The decline in merchandise began following financial crisis that was witnessed around the world in 2008. As per the data generated by World Bank, the trade from merchandise grew from 16% of the world GDP as per 1990 to just 26% by 2008 (Gupta & Wang, 2016). It is since then that steady declines have been reported and now the figure stands at only 21% of the global GDP.
It is important to note that political headwinds have no ties with the inability of merchandise to be traded so as to keep up with the expansion of global GDP. The real culprits in this context entail the end of products boom, increasing costs of doing business in China, declining rates of growth in primary importing economies, increased automation due to expanding imperative for client responsiveness demanding supply chains that are shorter (Haller, 2016). Many of such factors will be more salient in future. Based on such facts and ever-increasing political clamor for domestic manufacturing demonstrate that merchandise trade will be a meager driver of global integration in 2025 as compared to the present (Gupta & Wang, 2016).
One mistake commonly made by casual observers is that of looking at world economic integration with regards to only merchandise trade (Solomon, 2008). Practically, economic integration is a phenomenon that is multi-dimensional that incorporates trade of services, merchandise trade, investments that transcend cross-border and flow of data. Global integration thrives due to the existence of the above-said factors. Reports indicate the trade of services has grown steadily from 4% of global GDP in 1990 to more than 6.7 as of today (Gupta & Wang, 2016). Identically, more than n 30% of global GDP and global levels of FDI is higher in the present world that it has ever been. Reports from McKinsey & Company indicate that data flows from cross-border presently are 20 times more than they used to be 2005.
The Need for Localization
In a nutshell, global integration when looked through the broader lens, it is eminent and well. However, its structure and framework that of morphing.in the past it was propelled by trade but as of today, it is propelled by investments (Arnould, et al., 2009). The call by president Trump to have Toyota produce more units in U.S. markets as opposed to importing from other places can be termed as emblematic. Such calls can only be associated with gathering steam.
The strategic repercussions for multinational firms are the the likes of GE and Siemens with Western origins or Huawei and Tata Group that have Asian origin is open and transparent. It is thus crucial that such firms double their efforts on domesticating their operations in any other primary market that they operate (Goff, 2016). Product specification and design may continue being greatly standardized. However, the production of goods and services will demand to be customized as per the locals’ needs and demands.
The role of political leaders has always been willing to allow the market forces determine how global or domestic the design and features of commodities are (Hayes, 2008). However, such leaders do show care and due diligence on whether such firms create jobs and bring in regional investments. They care as to whether such multinational corporations contribute towards their economy as opposed to operating as tourists (James, 2012). one obvious caveat to the need for more localization is that the market has to be big enough to facilitate efficient scale of operations (Gupta & Wang, 2016). Though this is generally the case for large economies such as China or Brazil it may not be applicable in countries such as Saudi Arabia or Thailand. In the latter scenarios, MNCs would be much better if they think of regional localization. Increased localization has been associated with yielding substantial benefits for MNCs.The increase of resilience can be enhanced through reducing reliance on fluctuations associated with currency. It should also assist the firm to hire best local talent thus strengthening its association with the local government. Both elements should increase the competitiveness of a company vis-a-vis local incumbents.
CEO of GE in one of his commencement speeches in 2016 made it clear when he stated that the global future of a company relies on its drive to focus on localization (Gupta & Wang, 2016). However, this does not translate to GE to change its digital strategy for all markets. However, what this means is that GE has to invest and produce locally more compared to what it does in the present in every other primary market it has a substantial market. (Duncombe & Dunne, 2018) Thus, any other company should be thinking along similar lines of thought.
Importance of Branding for MNCs
International and local brands have existed for a long duration of time in the business arena. The most common approach that has been adopted by firms is that of going global by extending their local marketing strategies to global markets. In a nutshell, such firms adopted the standardized strategy of branding. As companies expand their international operations, their standardized approach with regards to branding led to what is referred as global branding. A brand can be defined as anything that enables sellers to be recognized and as such distinguishes company’s products from those of competitors. With regard to branding, trademarks can be identified as part of branding as they are used in differentiating products of a particular company to those of competitors. Branding is a very important component of a product cannot be advertised without branding. Thus, global branding entails involving all three components of a brand across the world. For instance, products aiming youths and luxury niches are suited for global brands.
Also, in some markets such as hotels where heavy customer mobility is reported, international branding is deemed to be more viable. International companies need to keep seeking for international branding avenues. International brands can yield competitive edges making it difficult for domestic brands to compete with such a brand. International brands for that matter can be motivated by international advertising campaigns that have established international positioning which leads to huge economies of scale in their marketing approach. However, in some scenarios where market situations are heterogeneous, the only choice is to acquire domestic brands.
Nevertheless, in conjunction with the concept of branding for domestic markets, scholars of international branding champion for the construction of brands on an international level as it offers avenues needed to capitalize on economies of scale thus improving international markets and pursuing various market niches. The advantages from an economic point of view reiterate the benefits of branding not only in local markets but also in international markets. Other advantages of international branding entail:
The topic of trade that transcends national borders has become critical to debates with regards to social justice and on the responsibilities to the poor on global scales which forms two primary concerns of modern political notions. However, the vetted strategies fail to address the participants involved in trade and guide them on normative guidance for making rational decisions in circumstances that are not ideal. Empirical literature analyses fair trade as a strategy used for conforming to a better world irrespective of whether the world is without poverty or purely a global order. Many scholars that have led in evaluation the concept of fair trade as a strategy of evaluating poverty attest and agree to the fact the impacts of fair trade tend to generate positive benefits to the people. However, there is contrasting information where the studies acknowledge the fact the effects of fair trade are modest and that benefits from such a trade fail to reach and benefit the poorest among the world’s poor.
A company that wants maintain its presence in the market while remaining competitive, it is essential to implement a brand strategy that is effective. However, based on the framework of an international firm and the commodities offered global firms can strategize on the branding of products, corporate branding or employ a mixture of both. However, global firms are compelled to adapt to the preferences of the locals and their cultures. The focus of this case study is to evaluate global branding techniques adopted by international firms. A qualitative case study entailing Sony Ericsson was conducted. Based on the study, it has been revealed that global firms employ either brand strategy that is product oriented or a corporate brand strategy.
There are instances where mixtures of both kinds are employed but in the case of Sony Erickson, the main focus has been laid on the corporate brand. The use of product branding, a company is in a position to offer multiple products in varying business niches. However, with corporate brand strategy, the brand and the corporate are identical in all aspects.
The concept of international marketing has turned out to be an established fact of conducting business operations for most firms. Many small modern companies have the desire and ambitions of going global and such ambitions are further facilitated and boosted by the growth of electronic commerce which is internet based and such a system has the ability to connect firms across the globe in a marketplace that is vast via electronic means. A marketing channel in this context refers to a group of practices that are necessary to facilitate the transfer of ownership of goods from the production point to the selling point. It is the mode that facilitates that products get to consumers and such modes are also referred to as channels of distribution.
Sony Ericsson is a joint venture is claimed equally by telecommunications incumbent Ericsson and the Sony Corporation, the latter being popular as a powerhouse for electronics. The joint venture was set up in 2001 and is estimated to be worth one hundred million Euros and its first commodity was launched in 2002. Sony Ericsson’s management team is stationed in London. The company is ranked as the fourth largest manufacturer of mobile phones in the global market. The company has approximately employed more than 8000 employees and has close to 2500 contractors globally.
The company has an estimated revenue of about 6 billion and its annual profits are estimated to be generating a stream of about 800 million annually.
Sony Ericsson is said to be the world provider of multimedia gadgets such as phones and personal computers. The products manufactured by the company come along with a blend of robust technology and creative applications that result in facilitating better communications, entertainment, and music.
The company, Sony Ericsson diversifies its products which makes the company have a competitive edge over its competitors. The other primary strength lies in its Sony brand name. The product by the company named Sony Ericsson W910i was known as a Walkman phone. This was the first phone that replaced the file manager that was in other models that had been produced earlier. The phone also had other appealing features such as the Java video games, the shake control application and this model was available in six colors. On account of such features, the company received the award of having the best handset in 2008.
Sony Ericsson employs three means to expand that is developments that are internal and this is achieved through product innovation, acquisitions, and cooperative techniques. Through cooperation with other firms, Sony Ericsson is better positioned to leverage its key competencies to expand and boost its performance thus it creates more value for its shareholders.
To be precise, a strategic alliance is a major kind of cooperative strategy that Sony Ericsson employs in most instances in achieving competitive edge which translates to the success of the company in the marketplace. A good example is a cooperative strategy that Sony entered with AOL and such a strategy was meant to establish leverage on internet technologies in ways that could see maximization of customers value whilst improving the position of the company with regards to its competitors.
Sony Ericsson also employs strategic alliances based on non-equity with an alliance composed of 9 companies that push for the adoption of DVD that is based on Blu-Ray technologies over the rivals such as NEC and Toshiba who on the other hand propose the standard DVD. Also, in accelerating the use of next-generation microprocessor technology, Sony Ericsson establishes a cooperative strategy that is business oriented by having partners such as IBM and Toshiba.
Sony Ericsson is more probable to prosper in its alliances as the company has proved beyond reasonable doubt to be involved in solving problems and being a trusted partner through pursuing strategies to put together resources and capabilities with the partners aiming to create value. A good illustration is how Sony Ericsson continues making constant losses in 2003. This made both Sony and Ericsson pledge resources into the venture. Sony has been unsuccessful in establishing market share that is substantial, the joint venture allowed Sony to improve the potential of competing in market environments that are uncertain. The joint venture allowed both firms to initiate relationships that are long-term and facilitate the transfer of tacit knowledge.
Sony Ericsson employs the use of global strategies in availing standardized commodities across global markets with a competitive strategy that is dominated and presided by the home office. This permits the firm to enjoy economies of scale and also provides greater avenues to capture innovations that are developed at the corporate rank or in one particular nation and then utilize them in other markets.
Majorly, Sony Ericsson uses numerous modes of entry which entail exporting and establishing joint ventures with global partners, acquiring an international firm and developing a new subsidiary. It specifically prefers joint ventures as the firm has had a bad experience following the collapse
Four primary brand constructs are available to companies and this entail: corporate brands, product brands or a combination of both corporate and product brand (Azuayi, 2016). However, Sony Ericsson employs both corporate and brand strategy while the corporate brand is the dominant one. Also, the concept of brand technique is commonly employed by international enterprises and its primary motive is luring customers’ purchasing decisions and facilitate brand transfer to new products. Sony Ericsson being a master brand has other three sub-brands under its primary brand. The sub-brands play the role of creating value addition to the commodity making the commodity product easily identifiable. Also, the sub-brands categorize the product into different qualities and characteristics thus enabling maximization of customer satisfaction. Additionally, some of the marketing strategies employed by Sony Ericsson with regards to its global brand can be seen below:
Corporate brands have been associated to developing strategic emphasis that pertains corporate technique, communication, and a corporate norm (Goff, 2016). Such a theory defines case of Sony Ericsson since the company has developed a strategic mechanism where the values of the corporation are crucial and align with overall framework of the company. The management in this context plays a vital role of setting the values and then the values are communicated to the entire firm and workers in this context are tasked with the responsibility of communicating these values to the entire company.
Thus, it is prudent that corporate brands get monitored by the president of the company. Thus, this aligns but not entirely with case study where Sony Ericsson is under the leadership of a senior manager and the primary responsibility remains on a senior manager in charge of each department. Thus, the corporate brand gets communicated by the entire firm and has got many channels of communication made possible through executive communication as opposed to marketing communication. The team associated with management of a brand determine the beliefs and practices of the firm and shares such values, however, the leaders of the three segments have same duty with regards to the brand.
However, the theory seems to differ from the case study as theory postulates that the general role of the brand rests on the shoulders of the firm’s CEO. However, the same theory seems to agree with the case study in the manner that a product brand gets communicated by the entire firm in a manner that employees in a company are entitled to have knowledge of the key values of the firm and communicate such values to the general public. Thus, workers have a fundamental duty in improving perceptions and sustaining the brand.
The emphasis on a brand classified as corporate is not only for consumers but also for the shareholders both internally and externally and it is the role of corporate brand to fulfill the expectations of stakeholders. There should be a balance on the focus for both the customers and the shareholders in developing a complete brand. Thus, it is in line with the case study where the respondent firm revealed that all stakeholders are crucial with regards to the value to the company. However, the corporation, later on, reveals that consumers are the most crucial stakeholders. The company’s client’s in this context entail retailers and consumers.
It is true that workers are regarded as highly valuable due to the fact that they sustain the brand and maintain a good reputation about the business. The communication of corporate brand is channeled towards all relevant stakeholders and that corporate brand has minimal effect on clients and also falling demand for commodities.
Lastly is the concept of localizing products and standardization. It is necessary to have a strategy that is standardized in global markets so that a company can reap the benefits of economies of scale thus decreasing its operating and overhead costs. It was found out from research studies that standardization techniques armors firms with the power to enjoy from production that is large-scale, however, attempting to adapt the needs of each niche may help in raising income for the company. As per the case study, Sony Ericsson has adopted a standardization technique that is consistent globally.
However, it is important for a company to adapt to the needs of domestic preferences based on market demand. This is consistent with some of the theories that demonstrate the necessity of adapting the marketing mix due to the existence of heterogenic markets across the world. Despite the fact that markets are gaining new facets of becoming more homogenous as days go by, diversity and customers still prevail in various markets that have preferences that are greatly differentiated. However, challenges and difficulties arise when it comes to standardizing a global brand and sometimes it is discussed that a commodity can be identical sometimes though the name of the brand is always different. As such, the empirical findings with regards to Sony Ericsson demonstrate that the company can have the same name of the product while at the same time traits of the product are localized.
The findings from the researchers demonstrate that international firms varied branding techniques based on the framework of the company. This could be the case when either the firm adopts a commodity brand technique or a corporate brand mechanism. However, multinational corporations are known of possessing many elements that are identical irrespective of their organization. Thus, limit of the case study was focused on Sony Eriksson which served as a perfect example of multinational businesses.
The firm Sony Ericsson has been associated with employing standardized techniques in global markets and in a few cases localizes the product or adapts the product to suit the needs of particular local markets. Most global firms have been associated with shifting attention from commodity brands to corporate brands as they channel their efforts towards internationalization. Sony Ericsson adopts the technique of corporate brand and has been employing this technique in penetrating foreign markets. The company never started with product strategy as theory indicates thus the findings by researchers contradicted the theory.
It was also stated that in most cases, a brand evolves from a domestic brand and later on when the brand becomes popular, it moves to overseas markets. However, based on the case study it is apparent that Sony Ericsson began as an international brand and skipped the flow chart from being domestic to an international brand.
The issue of corporate brand has always been associated with a long phase and a commodity brand, on the other hand, has a short phase. Sony Ericsson has an approach that is long-term and its strategy has been stable throughout the firm. Thus, the theory fails to agree and match with empirical outcomes.
The research revealed that creativity is crucial for international firms. However, the focus appears to be laid on innovations that are economical where management of the brand is relevant when it comes to firms concentrating on brand strategy for a specific product. In conjunction with businesses adopting corporate brand strategy as is the scenario of Sony Ericsson primary focus appears to be on innovations of commodities with regards to technological and product aspects of a particular commodity. As such it does not have to be who goes to the market first but rather the best in class. Though sometimes firms enjoy advantages associated with being a first mover in the market.
Sony Ericsson faces some challenges such as unfavorable government policies, scourge of piracy and global recession that is prolonged. In overcoming such threats, Sony may adopt the following actions.
Use globalization to overcome government policies that are unfavorable. For instance, Sony is a Japanese company was denied the opportunity of establishing its broadcast networks in the United States of America in 1990. To make up for such a loss, Sony invested more on its satellites broadcasts in Japan through partnership strategy with other nations. It is due to such constraints that Sony globalized its production that enabled the company takes advantage of the shift of global markets. Thus, Sony should continue using the strategy of globalization as an instrument for mitigating government policies that are unfavorable.
In mitigating adverse impacts of prolonged recessions globally, Sony should reduce its cost of production. In attaining this, the company should fasten its pace by restructuring it music enterprises and adopt various cost-cutting strategies. Sony Ericsson should also identify other different locations that are considered low cost and the company can relocate its manufacturing plants to such cost-efficient places. Also, Sony should continue outsourcing its production units. All such activities enable Sony to command substantial profit margin which is essential in fighting sluggish demand.
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