Jin Won Jeong
Dec 12, 2014
1. Regional Strategy:
According to the readings for session #1, a very few multinationals are truly global.
a. What are the bases for the claim that most multinationals are regional?
The primary bases for the claim that most multinationals are regional are first the extraction of revenue by many “global” multinationals is confined to a region as opposed to the entire world, and second the similar market environment within certain region makes regionalization much more practical than globalization.
First, Revenue generation in terms of geographic location is limited to specific regions or area, ...view middle of the document...
Therefore, regionalization imposes less risk than globalization.
b. How would you determine whether a multinational is either global or regional?
To determine whether a multinational is a global or regional, it is crucial to look at the following framework: global market penetration progress.
The word, global, signifies that a product or service is offered all over the world by a multinational firm. However, based on such assumption above, there is no global multinational, probably except Coca Cola. There is no multinational that penetrated every single country in all continents. However, there are multinationals that are regional and semi-regional players. Again, as there is no standard for a global company, such as “A global firm is any firm that provides products and services in over 200 countries.”
Equally importantly, it is crucial to look at the revenue generation by specific regions. For instance, CJ Corporation, a conglomerates in food, logistics, trade and home shopping industries based in South Korea, claims to be a global company, but it only generates 30% of total revenue in foreign countries; more importantly, these foreign countries include Korea’s adjacent countries, including China and Japan; the market expansion by CJ Corporation is a demonstration of regionalization, not globalization.
Many firms are in the similar situation. These multinationals might claim to be a global player, but by looking at their global market penetration progress and percentage revenue generation (home country/region vs. foreign country/region), many firms would be filtered out.
c. If regional, are there any different types or levels of regionalization?
To determine the scope of a multinational’s market expansion status, categorizing different layers of regionalization could be helpful.
First, there is home region. A domestic firm operates domestically and expand its geographic footage into adjacent countries. Previously, a significant number of multinational firms started out as a multinational in home region first. However, due to the improving cost effectiveness in logistics, now multinationals are not confined to home region.
Second, there is foreign region. A domestic firm operates domestically and within its home region, then expand into a foreign region. For instance, Chipotle expanded into Western market and prepare for entering the Asian region. However, due to the rise in the information technology industry and logistics industry, it has become easier to detect demand globally and finding economic ways to transport them. Therefore, although it used to be common that a multination establishes market presence in its home region and expand, it is no longer the case. For instance, Samsung exported its consumer electronics to the United States before it did to China and therefore establishing a strong market presence in the United States than in China.
According to other cases, similar concepts are mentioned, such as...