News>2008.08.25

 

【Column】"Is global market being concentrated or fragmented?"

 

It is, marketing guru, Mr. Theodore Levitt that assumed emergence of identical globalized market for standardized product, since any markets in countries and regions are getting homogeneous. Since 19080's, given aggressive corporate efforts expanding its business in a global scope, main players and characteristics of markets are converging at some level. Recent hit of book "World is flat" represents this view.

However, even in macro trend of being flat world, since globalization speed and level by each industry varies, we can not put all industry together in a same bowl. Thank to characteristics of each industry, "economies of scale" work differently. Main question to each corporation is how to design and acquire ideal own position in the future in a global scope.

As an example of global market trends, let me pick up concentration of main players in 2000 and 2006 at beer industry from consumer market and tire market from industrial market.

Findings are that beer industry players are being concentrated although customer preference by regions and countries varies. On the contrary tire market where "economies of scale" must be leveraged is not being concentrated in 2006 in comparison with that of 2000. Share of top 3 players at tire market is rather being less concentrated. So how do we interpret this change in a globalization context.

Is global market being concentrated or fragmented?

 

In the global beer industry, manufacture focus on growth strategy with M&A instead of global beer brand development for global market. Inbev, acquiring American Anheuser-Busch these days, has aimed dominant regional players as M&A candidates. Past Inbev's M&A cases like merger with Brazilian dominant "Ambev" and Chinese dominant "Lion Group" support its M&A policy to acquire regional major player. At a M&A case of Anheuser-Busch, Inbev will review and re structure new beer brand portfolio. (Forbes, Aug 14, 08; InBev says divestments from AB merger to focus on businesses rather than brands) This growth strategy with M&A can effectively drive market entry faster without developing new brand for regional consumers preference and building distribution channel in each region and country from scratch.

In the global tire industry, as major top 3 players were globalized, emerging markets like China grew too. From existing players perspective, these emerging markets are not only "market opportunities" to enter but also "threats" with nurturing potential domestic competitors in emergent markets. In fact at tire industry in China, domestic players like GITI Tire and Shanghai Tire are rising by making use of cheap labor cost, and are scaring existing major players in a global scale. These growing domestic player in emergent market must be one of factors which prevents global market from being concentrated.

Regardless of what industry you are, in order to create strategy effectively, it is crucial to look out over ideal own positioning in the future with understanding industry characteristics in a global scale. It must be worthwhile asking what global market is from time to time.