ก ธ. 322 กลยุทธ์ และการดำเนินธุรกิจระดับโลก BI. 322 Global Business and Strategy

1. Integrated Bachelor’s and Master’s Degree Program In Accounting and Business Management (IBMP) Faculty of Commerce and Accountancy, Thammasat University กธ. 322 กลยุทธ์ และการดำเนินธุรกิจระดับโลกBI. 322 Global Business and Strategy Mr. Gavintorn Atthakor Email: gavin.boat@gmail.com

2. Strategy?

3. A Global View… Comparison of Various Continents 147.5 Bn 192 6,397 Australia/Ociania 32 % 7.7 14 727 9.9 380 13.2 13.2 46 501 17.8 878 12 24.3 Australia/Oceania 23 Europe 30.0 53 Antarctica 3,879 South America North America 44.6 44 Africa Asia (Million Sq. Km.) (Million) Note: As of 2006 Source: WorldAtlas.com

4. Largest and Most Populous Countries of the World Top 5 Countries By Population Top 5 Countries By Area Note: As of 2006 Source: WorldAtlas.com

5. Who Cares About Ranking by Population and Area? • Who’s the RICHEST Country?? • So how do we define WEALTH?? • GDP (Gross Domestic Product)

6. What is GDP? • The gross domestic product (GDP) or gross domestic income (GDI) is one of the measures of national income and output for a given country's economy. GDP is defined as the total market value of all final goods and services produced within the country in a given period of time • GDP = C + I + G + (X-M) • Where • C = Consumption • I = Investment • G = Government Spending • X = Export • M = Imports

7. So “Who is The Richest?” “International Dollar” $ Billion GDP (PPP) By Country (Top 30) #23 Thailand Country But USA and China has a lot of productive units (people), What’s the GDP per Capita? Note: As of 2007 Source: World Bank

8. GDP per Capita “International Dollar” $’000 GDP (PPP) Per Capita By Country (Top 30) #69 Thailand $8,138 Country Note: As of 2007 Source: World Bank

9. Purchasing Power Parity (PPP) • Purchasing power parity is an economic technique used when attempting to determine the relative values of two currencies. • PPP takes into account this lower cost of living and adjusts for it as though all income was spent locally. • The PPP exchange rate (“real exchange rate”) equalizes the purchasing power of different currencies in their home countries for a given basket of goods. • PPP is based on the assumption that in an ideally efficient market, identical goods should have only one price. • E.g. The Big Max Indexand the iPod Index

10. Big Mac Index Source: Economist July 2008

11. A Pictorial View of PPP Note: As of 2007 Source: World Bank

12. “Group of Seven” (G7) Developed Markets • Australia • Austria • Belgium • Canada • Denmark • Finland • France • Germany • Greece • Hong Kong • Ireland • Italy • Japan • Netherlands • New Zealand • Norway • Portugal • Singapore • Spain • Sweden • Switzerland • United Kingdom • United States PLUS, Russia = “Group of Eight” (G8) Source: Morgan Stanley’s EM Index (May 2008)

13. G8 Countries Dominates The World’s Economy % of Total Rest of the World G8 Countries

14. 27 Countries In the European Union (EU)Making It the Second Largest Economy 15 Countries Adopted Single Currency (€) 12 Other Countries Retained their Own Currencies • Austria • Belgium • Cyprus • Finland • France • Germany • Greece • Ireland • Italy • Luxembourg • Malta • Netherlands • Portugal • Slovenia • Spain Bulgaria Czech Republic Denmark Estonia Hungary Latvia Lithuania Poland Romania Slovakia Sweden UK EU Statistics Population: ~500 mil (#3) Area: ~4 mil. Sq. Km (#6) GDP_PPP: $10.3 trillion (#2)

15. BRIC 2. Rapidly Growing Markets Emerging Markets Emerging Market is a term used to describe countries that are between “developing” and “developed” status and are going through rapid industrialization. • Argentina • Brazil(2) • Chile • China(2) • Colombia • Czech Republic • Egypt(2) • Hungary • India(2) • Indonesia(2) • Iran • Israel(1) • Jordan • Malaysia • Mexico(2) • Morocco • Pakistan • Peru • Philippines • Poland(2) • Russia(2) • South Africa(2) • South Korea(1) • Taiwan(1) • Thailand • Tunisia • Turkey(2) • Vietnam • More than EM but maintained in index for continuity • Big Emerging Markets • Source: Morgan Stanley’s EM Index (June 2006)

16. 2. Rapidly Growing Markets BRIC Countries Accounts for 22%% of the World’s GDP % of Total Rest of the World BRIC Countries

17. “Outreach Five” (O5) The Other Emerging Markets Group Sounds More Like Charity Emerging Market is a term used to describe countries that are between “developing” and “developed” status and are going through rapid industrialization. • Argentina • Brazil(2) • Chile • China(2) • Colombia • Czech Republic • Egypt(2) • Hungary • India(2) • Indonesia(2) • Iran • Israel(1) • Jordan • Malaysia • Mexico(2) • Morocco • Pakistan • Peru • Philippines • Poland(2) • Russia(2) • South Africa(2) • South Korea(1) • Taiwan(1) • Thailand • Tunisia • Turkey(2) • Vietnam • More than EM but maintained in index for continuity • Big Emerging Markets • Source: Morgan Stanley’s EM Index (June 2006)

18. Most of Large Corporations are Global Firms (1) The ranking is based on a mix of four metrics: Sales, Profit, Assets and Market value. Note: As of 2007 Source: Forbes

19. Most of Large Corporations are Global Firms (2) • ~356,000 staffs • Over 200 million customer accounts in over 100 countries • Diversified financial services firm • Consumer Group (Citicards, Citifinancial, CitiBank) • Wealth management Group • Institutional Client Gtroup • Over 50% of revenue from international businesses • 82,000 staffs worldwide • Operate in over 40 countries in 6 continents • Multiple businesses and brands • Upstream (oil exploration, extraction, shipping, and wholesale operations) • Downstream (marketing, refining, and retail operations) • Brands; Esso, Exxon, Mobil • 138,000 staffs in 80 countries • ~100 Brands in over 20 product catagories • Pantene, Head & Shoulders, Vicks, CoverGirl, Olay, Oral-B, Duracell, Pringles etc.. Note: As of 2007 Source: World Bank, Company Websites

20. What is Strategy?? • A company’s STRATEGY is its action plan for running the business and conducing operations • These action plans are in place in order to… • Grow the business • Attract and please customers • Compete successfully • Conduct operations • Improve company’s financial/market performances

21. 5 Generic Competitive Strategies Overall Low-Cost Provider Strategy Broad Differentiated Strategy 4 Broad Cross-Section of Buyers Best-Cost Provider Strategy Market Target 5 Focused Low-Cost Provider Strategy Focused Differentiated Strategy Narrow Buyer Segment (Niche) 3 2 1 Lower Cost Differentiation Type of Competitive Advantage Being Pursued

22. 1. Low-Cost How to Achieve Low – Cost Advantage?Examples • Economies of Scale • Operate to full capacity • Bargaining power • Learning Curve • Boost sales to spread Fixed/Overhead costs • R&D, advertising, SG&A expenses (selling, general, Admin) • Improving supply chain efficiency • Substitute with low cost components/materials • Online/IT software • Labour-saving methods • Outsourcing vs Vertical integration • Cutting out the “middle man” and going directly to customers • Streamlining operations • Redesign products • Offering frills-free product • Limiting product line

23. 1. Low-Cost When Low-Cost Provider Strategy Works Best • Vigorous price competition among rival sellers/competitors • Products are essentially identical and supplies are readily available • There are few ways to achieve product differentiation • Most buyers use product in the same way • Low switching costs for customers to change brands • A “buyers’ market” and bargain down prices • Industry newcomers use low introductory prices to gain customer base

24. 2. Differentiated How to Differentiate?Examples Types of Differentiations Examples • Unique tastes • Multiple features • Wide selection in one place • Superior service • Spare parts availability • Engineering design and performance • Product reliability • Prestige and distinctiveness • Quality manufacture • Technological leadership • Full range of services • Complete line of products • Superior image/reputations Dr. Pepper Microsoft Windows Tesco Lotus FedEx Toyota Mercedes Benz IBM Rolex Honda 3M SCB P&G Starbucks • Key Success of Differentiation • Differentiation must be difficult or expensive to copy • Buyers must value the differentiation (either Actual vs Perceived Value)

25. 2. Differentiated When Differentiation Strategy Works Best • Buyers needs and uses of product are diverse • There are many ways to differentiate the product (and buyers value these differentiations) • Few rival firms are not able or willing to follow the differentiated approach • Industry is dynamic and evolves around evolving product

26. 3. “Niche” Focused (“Niche”) Market Strategy • Focused Strategies concentrates on a narrow piece of the total market • Companies can choose to focus on a variety of niche markets… • By geographic areas • By customer segments • E.g. Gender, Age, Occupation • By specific product category • E.g. High-end goods • By product usage/attributes • E.g. Online, Direct sales

27. 3. “Niche” When Focused (Niche) Strategy Works Best • Target market niche is large enough to be profitable (with growth potential) • Industry leaders do not have presence in the market • Customer needs in market is specialized • Few rivals are attempting to specialized in same segment • Company has a loyal customer base

28. 4. Broad Broad Strategy Appeals to Large Spectrum of Buyers • The strategy does not focus on a particular market/customer, but appeals to broadspectrum of buyers • But still needs to have a competitive advantage • Through Lower Cost, Differentiation… • …or stronger Brand • Examples, • McDonalds • Coca-Cola

29. 5. Best-Cost What is Best-Cost Strategy? • Also known as “hybrid” strategy • Include up-scale attributes… • …At lower cost than rivals • Target market: Value-conscious buyers (Appealing extras at appealing low price) • Value Quality/Price • Best-Cost Strategy works best when… • Buyers and products are diverse • Buyers are sensitive to price and value • Company has resources, know-how and capabilities to execute strategy

30. 5. Best-Cost Best-Cost Example: Toyota’s Lexus Illustrative • Toyota has achieved low-cost leadership • Efficient supply chain management • Low-cost assembly • Used Best-Cost Strategy for Lexus • Designing high-performance characteristics to compete in luxury market • Leverage Toyota’s low-cost capabilities to incorporate upscale quality • Underprice comparable models of Mercedes Benz and BMW • Established separate (more personalized and attentive) dealers for Lexus High (-) IS250 C-240 Price-Quality Trade-off Quality Camry Low (-) High (-) Low (+) Price

31. Pitfalls of Each Strategy Low-Cost Strategy Differentiation Strategy Best-Cost Strategy Niche-Market Strategy • Get carried away with cost and price cutting. (“Price War”) Ending up with lower overall profits • Cost advantage is not sustainable and rivals are able to catch-up quickly • Low product quality due to over-aggressive cost cutting • Competitors are able to copy quickly • Buyers see little value in the unique attribute of the product • - Buyers not willing to pay the premium of differentiation • Overspending on differentiation. • Getting squeezed between Low-Cost and Differentiated competitors • Targeted market not big enough to be profitable • Battle head-to-head with industry-leaders or too many other competitors • Changes in needs of niche customers towards “mainstream” Broad Market Strategy • Unfocused and unable to compete (with niche players) and meet needs of customers • High cost to serve

32. Homework/Reading 1 • “Sidestepping Economies of Scale”, 5 Future Strategies You Need to Know Right Now • by George Stalk (Senior partner of The Boston Consulting Group) • “Losing its shine” (Japan’s luxury goods market), The Economist (September 20th, 2008) • “Minding the Cost Gap”, Globality: Competing with Everyone From Everywhere For Everything, HL Sirkin, JW Hemerling, AK Bhattacharya 2 3

33. Strategies for Specific Situations • 3 commonly encountered situations…. • Companies competing in emerging industries • Companies competing in rapidly growing markets • Companies competing in maturing, stagnant or declining industries

34. 1. Emerging Industries A Typical Product Life Cycle’s Divided Into 4 Stages Examples Hybrid Vehicles iPods DVD, Neon lights CRT Television

35. 1. Emerging Industries BCG Matrix • Also known as “Growth-Share Matrix” • Developed by Bruce Henderson of The Boston Consulting Group (BCG) in 1970 to analyze business units or product line so that companies can better allocate their resources. High (+) Question Mark Star ? Select A Few Divest Remaining Invest Growth Rate Dog Cash Cow Liquidate Low (-) High (+) Low (-) Relative Market Share

36. 1. Emerging Industries A (Hypothetical) Example of BCG MatrixSony Sony’s Portfolio (By Product Line) Revenue Wii DVD Player Business Growth Rate (%) Plasma TV Play Stn. VCR Hi-Fi Digital Cam. Video Cam Video Digital 5x 4x 0.5x 0.2x Relative Market Share(1) • Relative Market Share = Company’s Mkt Share/Largest Competitor’s Mkt Share • E.g. If co’s share is 20% and competitor’s share is 5%, Relative Share is 4x.

37. 1. Emerging Industries A (Hypothetical) Example of BCG MatrixSony Sony’s Portfolio (By Country) Revenue USA DVD Player Business Growth Rate (%) Japan China Singapore France UK India Thailand 5x 4x 0.5x 0.2x Relative Market Share(1) • Relative Market Share = Company’s Mkt Share/Largest Competitor’s Mkt Share • E.g. If co’s share is 20% and competitor’s share is 5%, Relative Share is 4x.

38. 1. Emerging Industries Relative Freedom Despite Some Challenges Challenges in Emerging Industries Strategy Options • Uncertainties about how large market’s going to get (and when) • Race to perfect the technology (which will be the “industry standard”) • Need to overcome customer’s concerns about product attributes • Barrier to entry are relatively low in some cases (if not protected by patent) • Might be some problems securing raw materials (suppliers unprepared) • Liquidity problems for small companies (to support R&D) • Push to perfect technology, improve product quality/attributes • Consider merging or acquiring another firm to gain added expertise • Or alliance with companies related/complementary technologies • Alliance with key suppliers to secure distribution channels • Try to gain first mover advantage by adopting dominant technology • Make it easy and cheap for first-time buyers • - Followed by further prices cuts to get next layer of customers • Create product awareness through advertising/marketing

39. 1. Emerging Industries Red vs Blue Ocean • Red Ocean: • Industry boundaries are defined and accepted • Competitive rules are known • Companies try to outperform their rivals on contracting markets • Commoditization of products and services • Blue Ocean: • Untapped market space • Created by expanding existing industry boundaries • Competition is irrelevant • Rules of the game are waiting to be set

40. Argentina • Brazil(2) • Chile • China(2) • Colombia • Czech Republic • Egypt(2) • Hungary • India(2) • Indonesia(2) • Iran • Israel(1) • Jordan • Malaysia • Mexico(2) • Morocco • Pakistan • Peru • Philippines • Poland(2) • Russia(2) • South Africa(2) • South Korea(1) • Taiwan(1) • Thailand • Tunisia • Turkey(2) • Vietnam 2. Rapidly Growing Markets Who’s in the “Emerging Markets”? Emerging Market is a term used to describe countries that are between “developing” and “developed” status and are going through rapid industrialization. • More than EM but maintained in index for continuity • Big Emerging Markets • Source: Morgan Stanley’s EM Index (June 2006)

41. 2. Rapidly Growing Markets Speed is Key for Growing Markets Capture largest share as soon as possible • Driving down costs per unit to attract customers • Increase production capacities to meet growing demands • Capture key distribution channels and sales outlets • Expand geographic coverage • Expand product range/line to appeal to wider customer range

42. 3. Maturing, Stagnant, Declining Industries Making Cows, Not Dogs • Maturing Industries = When nearly all the potential buyers are already users High (+) Question Mark Star ? Select A Few Divest Remaining Invest Growth Rate Dog Cash Cow Liquidate Low (-) High (+) Low (-) Relative Market Share

43. 3. Maturing, Stagnant, Declining Industries Industry Growth Rates In Thailand (1) GDP Growth 4.5% Industry Average 0.48% Change in Industrial Production Index % Growing Matured Declining Textiles&Textile Products Transportation Equipments Furniture and fixtures Products of Leather Electrical Appliance Setting Jewellery Others Industry Note: As of 2006 – 2007 (Jan) Source: BOI

44. 3. Maturing, Stagnant, Declining Industries Industry Growth Rates In Thailand (2) Change in Industrial Production Index % GDP Growth 4.5% Industry Average 3.9% Growing Matured Declining Textiles&Textile Products Transportation Equipments Furniture and fixtures Products of Leather Electrical Appliance Setting Jewellery Others Industry Source: Bloomberg (2006-2007)

45. 3. Maturing, Stagnant, Declining Industries “Grow It” vs “Milk It” “Grow It” Strategies to Extend the Life of Maturing/Stagnant Market “Milk It” Strategies to Fit the Maturing Market • Going head-to-head with competitors – Stealing market share • Make the product more “sticky” • - Switching (to competitor) is more difficult • - Create barrier to entry for newcomers • Emphasize on Value • Re-vamp brand and product to invigorate demand • Acquiring rival firms • Grow internationally • Streamlining operations to trim costs and improve margins • Build new or more flexible capabilities • Maintain high standards of product quality and services • Pruning marginal products and models

46. 3. Maturing, Stagnant, Declining Industries “Get Rid Of It” Strategic Options for Declining Industries End-Game Strategies • Focus on the growing segments of the industry • Examples: • Ben & Jerry’s and Haagen-Daz • Stress differentiation • Example: • P&G’s electric toothbrush and related products • Innovative cost reductions to improve margins • Slow exit • Generate as much cash from business for as long as possible • Cut-expenses to rock-bottom • Sell • Fast exit • Find perspective buyer in early stage of decline

47. Diversification • Diversification is a strategy that companies use grow their business by entering new market with a new product • Ansoff Product-Market Growth Matrix…. Product Present New Market Development Product Development Present Market Market Penetration Diversification New

48. Examples with in the Ansoff Matrix Product Present New • Market Development Product Development Present Market Market Penetration Diversification New ~ 40 brands in 16 Businesses

49. There are Two Types of Diversification Concentric Diversification Conglomerate Diversification Diversification to a new product/market that leverages the company’s existing product, customer base, technology or competency. Example: Boonrawd Brewery Diversification to a totally new and unrelated business. Example: What are the advantages & disadvantages of each type of Diversification?

50. Diversification Photohunt