B392F T1 Jan15 student

Warm-up Exercise• Article: “HMV launches new mobile app to kickstartdigital strategy” Plot the position of HMV on a Cost– Responsiveness Grid and indicate the direction in which HMV is likely to movein the future on the Grid. Recommend a strategy to HMV in viewing to the above position.

Think about:What are the cost reduction pressures of HMV? Is its pressure high / increasing? What are the local responsiveness pressures of HMV? IS its pressure high / increasing?

Warm-up Exercise• Sources of cost reduction pressures:– Competition landscapes? (e.g. Do the major competitors compete on cost?)– Technological changes? (e.g. E-music? Mobile app? Blu-ray?)  Investment intensity? Product standardization?

– Strategic aims of HMV after bankruptcy?

• Sources of local responsiveness pressures:

Appeals of music artists (e.g. global vs local?)– Technological standards? (e.g. cassette type vs MP3?)– Economic trends or levels across countries? (e.g. spending on lifestyle products like music?)– Distribution structures?

Four Basic International Business Strategies

Warm-up Exercise• Possible arguments – high vs low pressure for cost reduction:

Pressure for Cost Reduction

High

Low

 Cost-cutting as core aim after bankruptcy and restructuring

 Selling standardized music products which is hard to differentiate Major competitors like Wal-mart, Best Buy, Amazon.com are competing on cost (price) Technological advancements require higher investment intensity E-music are standardized in format and its selling is a business with higher fixed cost (lower marginal cost)

 favor mass production Record companies (manufacturers) promote their products on a global scale

 followed by retailers Music products & services are not necessities

 lower price sensitivity Young consumers are willing pay more on innovation and unique offers

Warm-up Exercise

• Possible arguments – high vs low pressure for local responsiveness:

 Music is a human global “language”

 serves universal needs HMV’s major world markets (e.g. Japan, Singapore, Hong Kong, Canada etc) are highly developed and with similar technological standards

Low

 Most music stars are local Tastes vary in music itself (e.g. music genre, language)

 Preference differences in music technology (e.g. quality pursuit (CDs, Blu-ray) vs convenience seeking (MP3) etc) Music products & services are “experience” product

 consumers look for customized offers

Pressure for Local Responsiveness

High

Warm-up ExercisePressure for Cost Reduction

• Cost – Responsiveness Grid of HMV:High

♪HMV?

♪HMV?

HMV?

HMV?

LowLow

Pressure for Local Responsiveness

High

Warm-up ExerciseStrategy recommendation  International / Global standardization / Localization / Transnational?

• Addressing the cost reduction pressures:– Goals are to cut costs on a global scale.– Offering music products that serve the international markets with minimal local customization (mass production).– Promotion on a global scale so as to achieve low costs through economies of scale / scope.

• Addressing the local responsiveness pressures:– Providing music products that matches local tastes (e.g. music styles) to fit across the geographical markets.– Providing music products with different technological formats.

– Value of products and services needed to be increased so cost isn’t its main focus (e.g. unique purchase experience by its new app).