B392F T1 Jan15 student

Warm-up Exercise • Article: “HMV launches new mobile app to kickstart digital strategy”  Plot the position of HMV on a Cost– Responsiveness Grid and indicate the direction in which HMV is likely to move in 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 Exercise Pressure for Cost Reduction

• Cost – Responsiveness Grid of HMV: High

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HMV?

HMV?

Low Low

Pressure for Local Responsiveness

High

Warm-up Exercise Strategy 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).