Wednesday, January 18, 2012

Globalization at Parker Pen Company

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1. Distinguish between a global and a multi-domestic strategy � [6]


The two strategies mentioned are what could be referred to as a businesses core proposal. Before they can determine pricing strategies, channels of distributions and marketing analysis the key players in a business need to identify whether to stay in their country, or move to a macro playing field.


To further emphasize on those points, the global and multi-domestic aspects will be broken down into two separate fields. Globalization on the international economic front pays reference to the process in which there is both an increase in world market share in both goods and services, and furthermore an increase in the integration in the world’s capital market. Here, you diverge from the local arena onto an international front. In turn, globalization has been linked with the cause of the rapid growth in world trade and economic growth. To tie certain concepts with the issues of Parker Pen, they superficially took their image as the driving force on their global escapade. With their “Make Your Mark with Parker” logo, standardized typeface, logo and design. This therefore proposed the idea to the consumers that Parker Pen was viewed similarly worldwide.


Multi-Domesticity tends to centre on the individual country and market themselves as opposed to homogenizing their image and products, companies adjust their strategies to best suit the various markets at hand and so too correspond to the difference in consumers needs and wants. Parker Pen did this in respect to the relevance of France and Italy, here expensive fountain pens were the catalytic approaches, where as in Scandinavia, a lower illustration was adopted with respect to the ballpoint pen being their primary scheme.


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. What challenges does a business face when it decides to market its product internationally? � [0]


When altering your median of marketing, whether it is domestically, nationally, regionally or globally many impediments with either hinder or facilitate your reposition. Much like life itself, each decision and choice we make comes with significant pros and cons, however the latter at times seems to foreshadow the first. Many reasons cause a business to encumber or re-think its move, and in this instance and when other businesses choose to digress to a universal arena, these are the crucial factors that come into play.


Legalities and the Governments � Indeed, there are many trade and foreign policies that countries and companies alike are subjected to and may be forced to comply with. For example, Japan’s closed-door policy caused may business to seek other opportunities elsewhere. Furthermore, the trade barriers and restrictions that could be cast upon you may disallow you to progress rapidly. Governments may not be partial to the idea of opening its trade doors to an overseas company, so in turn may take a bias against the firm. Additionally, there would be a distinct lack of appreciation if it caused a rupture in the domestic market and domestic businesses. As noted in China where the resident businesses went through losses and a native economic recession due to the entrance of international corporations.


Competition � When ‘going international’ you are put under direct competition with the more familiar local firms that are already well established in their given countries. With the concrete fundamentals already laid, many local businesses have loyal customers and perhaps secure contacts. As seen with Parker Pen, their product was lined up in a direct competitive comparison when the “Japanese had started making inexpensive disposable pens.”


Language, Social and Cultural Barriers - For the reason that you are not in your homeland, you need to adapt to the ways and means of your new consumers. Firstly, in order to do business with them you need to speak their language and learn their styles, previously Fedders air-conditioning company found this to be a necessity in China in order to interact with one another. Your advertising campaigns and methods of distribution need to carefully selected when entering a new country, as you will constantly be under a direct spotlight. For example, the revelations of women would in no respect be appropriate in a Pro Muslim society, thus coercing you to re-adapt. What may be a joke and turn on to you is equally another mans demise and aversion.


Ethics � The moral principles here need to under-pin the decision making process, tying hand in hand with the previous point, decisions in a foreign country need to be made on ethics even if it means overlooking the most profitable solution if it indeed favours and benefits society. ‘An ethical decision is what is morally right, it is not a matter of scientific calculation.’ Moreover one must ensure that he is selling his product and brand, and not his country and their religion and try and appear to adopt a missionary like stature via ‘cultural exports.’ Fortunately enough Parker Pen didn’t encounter this problem, because although fairly subtle, the question of ethics can indeed crumble a large-scale corporation if it is not practiced appropriately.


Human Resources � Who are you to employ? Who are your manufacturers, suppliers and distributors? How much do you pay? These are all key uncertainties that are addressed. In respect to labour, are you to hire more skilled workers and more unskilled and to what extent is it apposite to bring your own workforce.


Communication � With the difference in time zones and medial equipment, interaction between the headquarters and the foreign offices are very difficult to maintain. In a centralized system this would be evidently problematical, by calling at 5pm your time you may be waking up the CEO at 5am his time. Also, the idea of language differences comes into play again, where you may read left to right, others read right to left. Communication problems amongst the locals could arise and thus affect the business, as it wouldn’t have the ability to address the situation because of the language restrictions at hand.


Production, Distribution and Infrastructure � If you were to re-locate to a less developed country the concept of infrastructure would be an immediate concern because with the lack of a durable infrastructure comes a lack of safety. As well, where would it be most advantageous to set up your offices and factories in terms of location, and where could your distributional point reach its climax. Inevitably one may need to situate itself in the midst of the bulk majority of people, yet have its factory in the industrial outskirts of the city, like Shanghai for example.


Technology � Again, the notions of developments and advancements come into play when going international. Because in today’s modern world, one cannot progress successfully if its realm doesn’t allow them to do so on the technological front.


Financial Costs & Economic Standpoint � Firstly by adopting a multi-domestic strategy, one would have to scout and research each individual country and various consumer markets, which does add up as a great and significant financial cost. Moreover, currency problems could arise which would then stem to form conversion problems, “Parker Pen into a false security… about 80% of the company’s sales were abroad, which mean that when local currency profits were translated into dollars, big profits were recorded.” The economical shape of the country may mount to serious concerns because if it was a nd or rd developed country for example, the bulk share of people wouldn’t be able to afford an expensive product, Parker Pen. Therefore it reduces and limits your market segment.


. Distinguish between centralization & decentralization � [4]


Centralization is drawing decision-making powers from the local or lower-level parts of the organization, and concentrating them within the head office or centre. The advantages here is that it provides a consistent level of policies throughout the firm and it ensures quick decision making processes. However it reduces the input of the day-to-day experts and becomes heavily reliant on the executives, also it bears the risk of demoralizing managers who could have the ability to feel powerless and un-trusted.


Decentralization is the devolving power from the head office to the local branches/divisions. It involves passing authority down the ranks, delegation. Here, it empowers local managers and encourages them and heightens their motivational levels and so too does it reduce to day-to-day volume of communication. Conversely, the break in uniformity may strike consumers unsettlement and the local managers intuition may conflict with the head office, who’s position is to measure the success of the product and sales mixes.


4. What primary and secondary data could Parker Pen collect to help this decision making process? � [6]


Primary research is the gathering of first-hand data that is tailor-made to fit a firm’s own products, customers and markets. Parker Pens could’ve conducted interviews or questionnaires to see how much of the population were willing to purchase high priced pens at a given budget, similarly how many would buy lower priced pens. By doing this it provides them with a public consensual perspective on their company, and assists them to create a forecast of possible sales. Although the primary research is limited, the secondary research could prove to be more constructive. Secondary research is the gathering of information from second-hand sources (books etc…). Parker Pen could check their previous accounts to see which of their pens was selling well and which weren’t. They could indeed observe other companies accounts which would provide them of the successes and failures in their divisions, therefore combining it with the knowledge they obtained from their own company it would permit them to generalize the consumers preferences. In doing so it could inevitably allow them in predicting market trends and sizes.


5. What market segments exist in the pen market? � [6]


Market segmentation is the analysis of a market, which identifies the different types of consumer. Thus by matching the consumer categories with the products on offer, market niches may emerge.


Demographically the pen market would be subjected to the various age groups and social classes. Parker Pen attempted to identify these and spread their product across the spectrum by having ballpoint pens for the young and lower classes, to the fountain pens for the older, upper class generations.


Psychographically there are no distinct attitudes or tastes when pens are concerned, however by having various agencies it allows the pen industry (in this case Parker) a greater and deeper understanding to what may be classed as a trendy or staid look. In respect to the demographics and psychographics, the pen market spreads across the whole spectrum of ages and designs. The final segment that may exist in terms of market is that which is relative to the Geographic’s of the pen. The ideals of global and multi-domestic arise here where the region of sales needs to be considered. Pens are sold worldwide.


6. What went wrong at Parker Pen? � [0]


Parker Pens unsuccessful attempts at a corporate restructuring failed for numerous reasons that spin together to form a web of consistent confusion that arose from the 160’s till the mid 180’s.


It began with the perplexity of the currency situation they found themselves in and the fact that they were so heavily dependent on sales abroad. Due to this they had the initial misconception of big profits when the local currencies were converted. Furthermore, as time progressed and as the dollar’s value soared, Parker lost even more profits and so too did it lose a bulk of its market share. Hand in hand with the uprising of high end fliers such as A.T. Cross and Montblanc resulted in them losing even greater market stakes. At this point in time one could label Parker Pen as being a ‘problem child,’ or even to the extent of a ‘dog’ due to the fact that they lost such a large share, in a consistent market. Moving on, they faced extensive tribulations on the production and manufacturing elements of their escapade. With the continual breakdown of their $15 million plant, it not only would’ve caused lapses in production but also affected the machines drastically, all the way from the structure of the machine, down to its very gears. This proved evident as its “costs soared and the factory turned out defective products in unacceptable numbers.” These issues would’ve stemmed from the naivety and negligence of not fully researching the technical aspects of producing new pens, and if they had done so it would’ve increased to number of sellable pens and in turn reduced their costs. Another concern originated from the management themselves and the inter-relationships between the subsidiaries and the scheme of having 4 different advertising agencies. Peterson immediately cut one of the most profitable subsidiaries, and then by bringing in a further three managers caused even greater lengths of tension of conflict. With the core concept of centralization being adopted and accepted, it placed further pressure onto an already delicate situation. It resulted in being the ‘one world, one brand, one advertisement’ ideal versus the ‘Make Your Mark’ approach.


However the greatest contributing factor to Parker Pens loss was fanned from the idea to go global, and abandoning its familiar high rated market. Many consumers and distributors alike disagreed with the globalization strategy because they felt that Parker Pen could not be viewed at a consistent level throughout the world because it hadn’t yet stamped its reputation. On the contrary they should’ve embraced a multi-domestic policy and altered its worldwide markets progressively yet simultaneously keeping the core concepts of the company, which were the logos and images. Directly related to their adolescent attitude, Parker Pen ended up diluting the very image they were trying to sustain and uphold. By focusing on low-end products it resulted it losing its stature as an opulent brand, which thus caused an ultimate loss of $ million in the United States alone. Paying reference to the Ansoff Matrix this time, Parker Pen should’ve concentrated on developing or penetrating their market in order to regain their market share, this could’ve been achieved by new advertising campaigns or newer, classier pens. However they took the product development into mind but endeavored in diving into low-range products, in a lower range market.


The final straw and consequential factor was that their group marketing team were either sacked or had resigned by January 185.


7. Why has globalization increased in the last 10-0 years? � [8]


Globalization has been credited with the improvements in peoples standards of living, and so too has it increased the power of the multinationals. Some of the growth in trade has evolved as a result of efforts to make trade easier through the trade negotiations of the World Trade Organisation. Although this has only escalated over the past couple of decades, each country and company alike assisted in the eventual progression to a successful trading arena. Firstly businesses began to become more analytical and critical of the paths to profit they had accepted, and in turn took different routes. They progressed from a domestical front, to a national, then regional and eventually global. There were no drastic leaps and bounds. In doing so, countries reduced the barriers and restrictions of trading and hence lowered it tax and tariff levels, which permitted companies’ easier access to operate. With that in mind, the cost of communication nowadays is far faster and cheaper than it used to be, and along with the fact that we have a various spread of communiqu�s increases financial efficiency (asset turnover) within a business. Moreover, labour and production efficiencies are augmented because of the huge benefits of economies of scale that are on offer. At the present we look to specialists and the division of work, with the concepts of delegation and the greater spreads of the chains of commands being practiced. In terms of technical economies, such is the use of automated equipment where we find it to be more cost effective than sole manual labour. Although this is only apparent though when the fixed costs of the machine can be spread over the units of output. Bulk buying and obtaining supplies at lower unit costs therefore cuts variable costs allows us to gain from purchasing economies. Finally we are able to capitalize on financial economies of scale which stem from the lower costs of capital charged to large firms. Banks are now charging lower rates of interest, and investors are more open to and willing to accept dividend yields. Which is due to the fact that bigger firms are more diversified and less vulnerable to liquidation.


External economies are the advantages of scale the benefit the whole industry that gives far greater incentive for companies to perform them regularly. With all the given factors added up, the resultant product is a pacey yet progressive economy that spreads through much of the world via inter-relationships and globalization





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