International Markrting in USA

INTERNATIONAL MARKETING
STRATEGIES OF FOREIGN
COMPANIES IN:

UNITED STATES OF AMERICA

ANKUR PANDEY (IM-2K8-007)
ABHIRAJ PATEL (IM-2K8-001)

ECONOMY
 Rank: 1st (nominal) / 1st (PPP)
 Currency: US$ (USD)
 Fiscal year: October 1 – September 30
 GDP: $15.776 trillion (September 2012)
 GDP growth: 2.3% (September 2011–September
2012)
 GDP per Capita: $48,450
(2011; 14th, nominal; 6th, PPP)
 GDP by Sector: Agriculture- 1.2%;
Industry- 19.2%,
Services- 79.6% (2011 est.)
 Nature of Economy: Mixed

Credit rating

Standard & Poor's:
AA+ (Domestic)
AA+ (Foreign)
AAA (T&C Assessment)
Outlook: Negative


Moody's:
AAA
Outlook: Negative


Fitch:
AAA
Outlook: Negative

Economic History
 The economic history of the United States has its
roots in European settlements in the
16th, 17th, and 18th centuries.
 The American colonies went from marginally
successful colonial economies to a
small, independent farming economy, which in
1776 became the United States of America.
 In 180 years the United States grew to a
huge, integrated, industrialized economy that still
makes up over a quarter of the world economy.
 The United States has been the world's largest
national economy since at least the 1920s

BUSINESS ENVIORNMENT
 10th in ‘FORBES- Top 10 Countries For
Business-2012’
 10th in ‘2012 index of Economic Freedom’
 23rd in ‘The Enabling Trade Index-2012’
 18th in ‘Economic freedom of the world 2012’
 4th in ‘Ease of doing Business’ and 13th in
‘Starting a Business’ according to World Bank
Reports-2012.

Trade Facts
 Venture capital, as an industry, originated in
the United States and it is still dominated by
the U.S
 Out of World's 500 largest companies, 133 are
Of the headquartered in the United States !
 There are more than 250 general and special
purpose zones in the United States, including
The North American Free Trade
Agreement, or NAFTA.

HARVARD BUSINESS
REVIEW
 According to a report of the Harvard Business
Review in March 2012, by Michael E. Porter
and Jan W. Rivkin
 This research finds two sets of avoidable
causes that can improve the business
environment in the US.

The First Cause
 First are poor policies.
 The U.S. government is failing to tackle
weaknesses in the business environment that
are making the country a less attractive place
to invest and are nullifying some of America‘s
most important competitive strengths.
 The government has also failed to eliminate
distortions in the international trading and
investment system that disadvantage the
United States.

The Second Cause
 Second, in the rush to globalize, companies have
overlooked current and latent advantages of a
U.S. location.
 Many factors affect the profitability of operating in
a certain locale: wage levels, skills
availability, utility rates, taxes, subsidies, shipping
costs and reliability, local productivity, supervision
costs, and many more.
 These factors are complex, interrelated, and
dynamic.
 Locating an activity in one country often has ripple
effects on activities elsewhere.

The Second Cause
 Because many companies are still learning
how to weigh these factors—
indeed, processes for making location
decisions have lagged behind those for
virtually all other major investment decisions—
companies can fall prey to biases that work
against the U.S.

Suggestions…
 According to the Report,
 If the U.S. can tackle some of its weaknesses as a
business location, there are grounds for optimism.
 Important trends are beginning to favor a U.S.
location, such as rapidly rising wages in emerging
economies, increasing transportation and
logistical costs, and shortening product life
cycles, which makes ―near-shoring‖ attractive.
 Companies are also starting to understand the
hidden costs of off-shoring and to see and act on
their ability to improve business environments in
their U.S. communities.

Foreign Companies in US
Japanese

South Korean

Indian
(Covered in this Presentation)

Challenges for Japanese
Companies
 Americans have been quite Conservative and
repulsive for Japanese competitors. It can be
explained in the following Cases.
 Two highly publicized rulings in particular by
U.S. juries awarding very substantial damages
for patent infringement against Japanese
companies confirmed fears in Japan that the
American jury system is often biased against
large Japanese companies.

Minolta-Honeywell
 Minolta had infringed Honeywell patents
covering autofocus camera lens technology
and had been ordered to pay $96 million in
damages by the Jury.
 Later, Minolta ultimately settled the case for
$127.5 million.

Nintendo
 Likewise, Jury ordered Nintendo to pay $208
million to a bankrupt U.S. company for
infringement of its patent covering video
games.
 Another Japanese video game manufacturer
had previously settled with the U.S. patent
owner prior to the ruling.

Smith-Corona vs. Brother:
from defense to offense
 The most well known affirmative use of the
U.S. antidumping laws by a Japanese
company arose out of the filing of an
antidumping petition in 1979 by Smith Corona
Corporation against imports of portable electric
typewriters ("PETs") from Japan.
 A number of Japanese producers of
PETs, including Brother Industries, were
named as respondents in the antidumping
investigation initiated as a result of Smith
Corona's petition.

How did they Respond ?
 When confronted with unreasonable demands from
their competitors, Japanese companies no longer did
capitulate, but readily challenged these demands by
going to court.
 They might not have always been successful in these
endeavors, but their perseverance has earned them
the grudging respect of their American and foreign
competition.
 Their strategy has even begun to be emulated by
some of their foreign competitors.
 Japanese businessmen have, indeed, enacted this
aspect of their strategy for doing business in the
United States "broadly, correctly and openly"

Toyota
 Ranked 1st among top vehicle manufacturing groups
(Volume), end of year production-2010 by the International
Organization of Motor Vehicle Manufacturers (OICA).
 Toyota's (TM) share of the U.S. light vehicle market is 18%
and Honda's (HMC) is 10%. GM's (GM) share of its home
market is about 22%.
 Fifty-five years ago, the No.1 U.S. car company had 54%
of the U.S. market. By this time next year, GM's piece of
the American car pie could drop another 50%, bringing it
closer to Honda's.
 There is vast opportunity as it is said that GM and
Chrysler, after years of poor management or bad luck will
lose a tremendous amount of business if they continue
operating in bankruptcy.

Toyota
 Toyota has played well in a long waiting game in
and made better cars than U.S. companies.
 It Kept labor costs low and built a reputation for
durable and dependable products.
 being hurt by the global car sales downturn, it
never had the labor cost or corporate debt
problems that plagued GM.
 It has the balance sheet to make it through the
crisis.
 ‗Maybe Toyota has been lucky for decades or
maybe Toyota was just smart‘

Toyota Vs. GM, according to Peter Morici, professor at the Smith School of
Business,
University of Maryland School, and former Chief Economist at the U.S.
International Trade Commission.

Toyota Vs. GM
 Toyota enjoys much lower labor costs in the United
States.
 Benefits from an undervalued yen for cars made in
Japan. In the United States, this comes to about
$2500 per vehicle.
 The entry level and middle level market segments are
very sensitive to price and vehicle durability.
 Toyota has been able to translate its cost advantage
into vehicles with higher, more attractive content and
longer life than General Motors.
 It's Camry and Corolla, and derivatives of those
cars, have been able to dominate their market spaces
and have even set the standard others must follow
and they establish the price thresholds.

Strategies
 Toyota is constantly looking for ways to lower
costs and improve products.
 It translates most of the additional profits it
earns, over GM, into better product design and
additional capacity.
 At GM, the Executives vote themselves
bonuses and the union demands more
benefits and featherbedding at the first sign of
profits

Toyota Diverging & GM Converging
!
 While G.M. is closing its factories in its native
country, Toyota is opening its new plants in
North America. This is because:
 It offers customers cars that are less
expensive and less trouble to own, over the
life of the cars.
 Toyota's don't break as much and perform
well.
 GM vehicles require more repairs and don't
age well.

"Wake up America and Buy
American"
 The native slogan "Wake up America and Buy
American" of GM may not affect the future of
Toyota in the US market.
 Thanks to big bonuses to executives, outsized
fringe benefits for the UAW, poor product
quality and just plain arrogance GM and the
UAW have lost the loyalty of American car
buyers.
 Americans are not protectionist in their buying
habits, and GM executives and the UAW have
lost the trust and loyalty of many younger car
buyers.

Toyota Tundra
 The full-size pick-up truck segment is considered
to be the most profitable and the fastest-growing
segment in a slow-growing US automobile
industry.
 Highly competitive with players like Ford and
General Motors dominating the industry.
 The World‘s largest Company-
2011, Toyota, aimed to increase its share in the
light truck segment through the launch of a new
pick-up truck model in early 2007, called Tundra.

Toyota Tundra
 In the market for pick-up trucks, the buyers were
known to be tremendously loyal to trucks made by
American companies.
 in its efforts to market Tundra, Toyota promoted
the pick-up truck at events considered to be
traditionally American such as NASCAR
racing, fishing tournaments, country-western
concerts, etc.
 The company also made an investment of $850
million to establish a new plant at San
Antonio, Texas, for manufacturing only Tundra
vehicles and set a sales target of 200,000 units in
2007.

Toyota Prius
 Due to constant Innovations in Technology and
Increasing fuel prices, Toyota has Innovated
the first Hybrid vehicle in 2008, Toyota
Prius, having dual power consumption
operating on Petrol and Electric engine.
 The company has placed it in the Segment
between Corolla and Camery and Marketed it
as of a Higher Segments.

Threats for Toyota Motors
 Gasoline price rise.
 With becoming big it may be difficult to have
effective control over quality.
 Vehicle quality has slipped in some places, and it
has developed its own arrogance.
 With the full size heavy pick up, it assumed it
could command the kind of premium it does on
cars, and introduced too many vehicles with to
many options‗
 Its trucks are simply too costly.
 It has to earn the pick up truck market, and it
assumed otherwise.

Toyota
 Whether it is due to wits or good
fortune, Toyota will become the No.1 car
company in the U.S. sometime in the next
year, and an American car operation will never
hold that position again.

— Douglas A. McIntyre
(former Editor-in-Chief of Financial World Magazine and
president of Switchboard.com)

Global Strategy
 At a time when global competition is
intensifying, Sony and Toray, using different
strategies, remain internationally competitive.
 Sony has continued to supply innovative products
to the global market.
 Toray has ensured that
procurement, production, and marketing are
carried out in the most appropriate locations in the
world.
 In a word, the former adopted the global-products
strategy while the latter decided on the global-
operations strategy.

Samsung
 Continuing with its strategy of flooding the market
with new gadgets, Samsung recently unveiled a
plethora of mobile devices and PCs ranging from
Smartphone, tablets, & phablets to smart cameras
& ultra books.
 The multiple announcements included updates to
some of Samsung‘s best-selling existing models
such as the Galaxy Note as well as new product
launches such as Series 5 and Series 7 Windows
8 tablets and a ATIV S Windows Phone 8
Smartphone.

Samsung
 The past year has seen Samsung gain a lot of
share in the Smartphone market. Its market
share has doubled to more than 36% in Q2
2011 from about 18% during the same period
preceding year.
 Currently it is the Global Market leader in
Mobile Phone with record +35%.
 While Samsung has had a lot of success in the
low-end of the market, it has been gradually
increasing its presence in the high-end
Smartphone market as well.

Samsung Vs. Apple Inc.
 Its main rival in the US had been the World‘s most
valuable company in the History, Apple Inc.
 Its huge lead over Apple in the second quarter of
2012, when it sold nearly twice as many
Smartphone as Apple, was partly driven by the
success of the Galaxy S III which sold more than
10 million units in under two months !
 Its success can be attributed to its much larger
portfolio of Smart phones that address more
market segments than what other popular
Smartphone such as the Apples' iPhone do.

But Apple‘s patent win could cause
a strategy shift
 However, Apple‘s recent patent win in U.S. worth
$1.05 billion in compensation threatens to stop
Samsung in its tracks.
 Having proven to the court that some of Samsung‘s
products infringe upon its patents, Apple plans to use
this as a precedent to press further charges against
Samsung.
 It has already filed an injunction to ban the sale of
eight of the patent-infringing Samsung devices in the
U.S.
 If Apple succeeds in doing so, Samsung may see only
a limited near-term impact considering that these
devices are fairly old and are nearing the end of their
product cycle.

Post Impacts of Apple‘s Patent
War
 While, in the near-term, this has little impact on
Samsung‘s strategy of flooding the market with
new similar-looking products, eventually it will
have to start focusing on designing its
products to look different from Apple‘s.
 This might cause delays in getting new
products out in the market but it is difficult to
say how much that will impact Samsung in the
long-run considering the R&D resources it has
at its disposal.

Post Impacts of Apple‘s Patent
War
 Apple‘s use of design patents can also cause
Samsung to divert some of its resources to competing
mobile ecosystems such as the Windows Phone.
 However, that would mean a return to ground zero for
Samsung considering that Windows Phones currently
command only about 3% market share.
 Eventually, we might have Samsung concentrating on
Android for low-end Smartphone (where Apple has
little interest) and on other platforms such as Windows
Phone for high-end ones.
 This would prevent Samsung from leveraging its
growing clout in the Android market and put a cap on
its market share growth potential in the future.

Vizio Vs. Samsung-L.G.
 The US Electronic Company Vizio is giving a
steady competition to the S. Korean Giants LG
and Samsung.
 Vizio –U.S. brand – it sells its electronics such
as HDTVs for lower or comparable prices to LG
and Samsung.
 Employees of stores such as Wal-Mart say that
it sells just as well as the other TVs and
customers do not come back with problems.

Other South Korean Companies
 To Capture the US market the Korean
companies LG, Samsung, Hyundai, Kia and
others are focusing upon delivering Quality
with a Competitive Pricing strategy.
 Still, the problem of Inflation can cause the
Increased Cost of Production and Exports for
them.

Information Technology
Outsourcing
 Expensive and Lesser no. of IT-Professionals
call for Outsourcing to other Countries.
 India Outsources 56% of World‘s IT business.
 Low Costs and availability of World‘s
maximum number of English Literates
encourages the outsourcing for the US
companies to India.
 TCS, Tata Consultancy
Services, Infosys, Wipro, Mindtree etc. are
major Indian players in the IT Industry.

US Companies Outsourcing to
India
 Mastek Limited: It is a premier P-CMM Level 3
and SW-CMM Level 5 company which provides
outsourcing in a number of segments like
finance, banking, analytics, and logistics and so
on. It has been in operations since two decades.
 Orcim Soft, Inc.: It offers a major portion of
outsourcing jobs to India in various sectors. The
main areas of expertise include software
development, solutions in information technology
and so on. The company has offices in various
countries like United Kingdom, US and so on

US Companies Outsourcing to
India
 Well known global banks and financial
organizations like CITIBANK, JP Morgan, GE
Capital.
 IT giants like IBM, Microsoft.
 Some more well known companies which
outsource to India are:
Oracle, Dell Computer Support, Hewlett
Packard, Schlumberger, ATT Wireless, Texas
Electronics, TransUnion, Rand McNally

TATA- Nano U.S.A.
 India's biggest carmaker by revenue is
increasingly dependent on its UK premium car
subsidiary Jaguar Land Rover for growth to offset
weakness in India.
 Hence, for making the Product global, U.S. is a
market that the company is looking for.
 The company is looking to launch a next-
generation version of its Nano, the world's
cheapest car, for the US market in about three
years.
 Nano for the United States is planned to have a
bigger engine and more features, and to sell for
under $10,000.

Submitted to: Dr. Prerna Kumar.
International Institute of Professional Studies, DAVV.
October 26, 2012.

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