3 Discussion activities-to reply- DUE: 2/12/2017
Topic 1. Local Responsiveness & Global Standardization
Student’s post:
I chose Procter & Gamble (P&G) for my consumer oriented MNE and ABB for my industrial MNEs. P&G is a MNE based out the United States and is a part of the consumer products industry (Global Edge, n.d.a). They have a market value of $218.9 Billion USD and profits of $8.4 Billion USD (Global Edge, n.d.a). ABB is a industrial manufacturing MNE based out of Switzerland (Global Edge, n.d.e). ABB has a market value of $48.10 Billion USD and profits of $1.9 Billion USD (Global Edge, n.d.e).
Demand in the consumer products industry is largely driven by a consumer's ability to purchase goods, home sales, and “domestic economic activity” (Global Edge, n.d.c, para. 3). Profits in this industry are driven success in marketing, operations, store traffic, inventory management, and order fulfillment (Global Edge, n.d.c, para. 4). This is industry is currently focused on increasing its ability to perform effective customer relationship management (CRM) and its presence in emerging markets like BRIC countries (Global Edge, n.d.d, para. 8).
P&G has been pulled greater towards local responsiveness. This is in part because a consumer’s ability to purchase goods and domestic economic activity are driven by the country in which goods are sold (Global Edge, n.d.c, para. 3). P&G has responded accordingly in these emerging markets through its corporate actions. For example, P&G has created products that are manufactured and targeted to some of the poorest people in the world (Payaud, 2014, p. 51). This market segment, known as bottom of the pyramid (BoP), is a current focus of this industry (Payaud, 2014;Global Edge, n.d.d,). P&G’s local responsiveness tendencies can be seen by selling products in over 180 countries; many of these products are region specific (Procter & Gamble, 2017; Payaud, 2014). This country specific product and marketing is necessary because many countries have different levels of purchasing power and as a result must be tailored to the country to be successful (Payaud, 2014). Products aimed at BoP in specific countries are designed to do things like save water; an often precious and expensive commodity (Payaud, 2014, p.52).
Demand in the industrial manufacturing is driven by a country’s “economic health”, and increased safety standards in industrial machinery (Global Edge, n.d.f, para. 3). Profit drivers include “engineering expertise”, product diversification, global expansion, efficient operations, and increased new equipment purchases (Global Edge, n.d.f, para. 4). Recent trends in this industry included increased efficiency in production and the decreased need for “unskilled labor” (Global Edge, n.d.d, para. 6). This industry is also moving more plants to developing countries to help cut production costs (Global Edge, n.d.d, para. 7).
Many of the largest MNEs from countries like Brazil and India are in the industrial manufacturing industry(Andreff, 2015, p.87; p.91). There are several reasons why MNE in this industry seek out investments in foreign countries; lower production costs, efficiency gains,raw and technical resources (Andreff, 2015, p.89).
ABB is no different. In the late 80’s and early 90’s ABB, set the example for MNE’s in the industrial manufacturing industry. At the time, most companies preferred to manufacture domestically then import; ABB was able to see tremendous revenue growth by undercutting competition with low cost foreign production of industrial equipment (Brege & Brandes, 1993, p.). As is typical, this push factor was country specific (Andreff, 2015). Cheaper labor was found outside of ABB’s home country. However, ABB is more driven by global standardization due to the drivers of this industry. Safety standards are a key driver (Global Edge, n.d.f, para. 3). As a result, companies seek a high quality and consistent industrial product. ABB knows this and their strategy focused on producing a consistent, high-tech, high-quality product close to the consumer (Brege & Brandes, 1993, p. 192).
References
Andreff, W. (2015). Outward Foreign Direct Investment from BRIC countries: Comparing strategies of Brazilian, Russian, Indian and Chinese multinational companies. European Journal Of Comparative Economics, 12(2), 79-131. Retrieved from http://ezproxy.umuc.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=114493711&site=eds-live&scope=site
Brege, S., & Brandes, O. (1993). The successful double turnaround of ASEA and ABB-- twenty lessons. Journal Of Strategic Change, 2(4), 185-205.
Global Edge (n.d.a). Consumer Products: Background. Global Edge. Retrieved from https://globaledge.msu.edu/industries/consumer-products/background
Global Edge (n.d.b). Consumer Products: Corporations. Global Edge. Retrieved from https://globaledge.msu.edu/industries/consumer-products/corporations
Global Edge (n.d.c).Consumer Products: Introduction. Global Edge. Retrieved from https://globaledge.msu.edu/industries/consumer-products
Global Edge (n.d.d). Industrial Manufacturing: Background. Global Edge. Retrieved from https://globaledge.msu.edu/industries/consumer-products/background
Global Edge (n.d.e). Industrial Manufacturing:Corporations. Global Edge. Retrieved from https://globaledge.msu.edu/industries/industrial-manufacturing/corporations
Global Edge (n.d.f). Industrial Manufacturing: Introduction. Global Edge. Retrieved from https://globaledge.msu.edu/industries/industrial-manufacturing
Payaud, M. A. (2014). Marketing Strategies at the Bottom of the Pyramid: Examples From Nestlé, Danone, and Procter & Gamble. Global Business & Organizational Excellence, 33(2), 51-63. doi:10.1002/joe.21533
Procter & Gamble. (2017). Investors. Procter & Gamble. Retrieved from http://www.pginvestor.com/