MTV Networks

1. TheStrategy of International Business Mariana.Jan.Audun.Kristian.Soren MTV Networks

2. The Playlist MTV Networks – Case TheTheory ValueCreation ValueChain LocationEconomies Economies of Scale LeveragingProducts & Competencies Local Responsiveness StrategicChoices TheStrategy Theencore CurrentEvents Q&A

3. MTV... A symbol of globalization Today Every day 2 milion people are watching MTV around the world, the majority outside the US Harvest of fruits MTV came to benefit from its “Glocalization” strategy where specific content was designed for each region/country 2000 MTV was established 1990 1987 Change of strategy Aimed at national or regional markets Local feeds for UK/Ireland, Scandinavia, China/Taiwan, South Korea etc. Weak start: Global service for local viewers. Local competitors outperformed MTV MTV Europe opened Weak start: Global service for local viewers. Local competitors outperformed MTV 1981 – 3 –

4. TheTheory

5. ValueCreation • A firm creates value by converting inputs that cost into a product/service on which consumers place a value. • Two type of strategies: • Low Cost – reducing production cost • Differentiation – increasing the attractiveness of a product or service

6. Value Chain Value created per unit Cost of production per unit

7. Location Economies Basingeachvaluecreationactivity at thatlocationwhereeconomic, political and cultural conditions, includingrelative factor costs are mostconducivetothe performance of thatactivity. • TradeBarriers & TransportationCosts • Political: Governmentpolicies • EconomicalRisks • CultureBarriers • Skilled Labor

8. Experience Effects • Learning Effects – cost savings that come from learning by doing. • Labor productivity increases • Economies of Scale – reductions in unit cost achieved by producing a large volume of a product. • MTV sent American produced programs worldwide • Local culture • Duplications of funcions  New programs / limit the ability to capture the available cost reductions

9. Leveraging Products & Competencies • Exporting a standardized, successful product or service • Nokia Mobile Phones, Starbuck’s Coffee, McDonalds • Build on core competences: • Unique know-how in technology, services, supply chain • E.g. Walmart’ supply chain, Toyota’s production • Achieve economies of scale • Mass replication of the standard product or service leads to significant cost reduction • E.g. mass production of mobile phones, cars, etc. • How MTV did it: • Export of successful TV show formats • MTV TRL, The Hills, etc. • Reliance on their core competencies • Producing Music TV shows & related formats • Hit their target segment tastes • But: Failure to achieve true economies of scale • Need for localization

10. Local Responsiveness • Differences in Customer Tastes and Preferences • Cultural Differences inhibit global standardization • Entertainment sector has a high need for local adaption • Local Responsiveness vs. Economies of Scale • Local adaption raise cost structure • Cost cutting effects are hard to realize • How MTV tackled the Issue • Missing adaptions made MTV fail in the first place • Service was broken down into ”feeds” to target local markets • Still, many program concepts originate from the US, or use a US concept, but... • There are additional local programs in several countries (e.g. MTV Kitchen)

11. StrategicChoices TRANSNATIONAL • Exploitexperience-basedcosteconomies, locationeconomies, transfer corecompetencies and local responsiveness. • Global learning • Caterpillar LOCALIZATION • Achievingmaximum local responsiveness • Extensivecustomization of product/service and marketing • MTV, P&G GLOBAL • Increasingprofitabilitybyreapingthecostreductionsfromexperience curve effects & locationeconomies. • No customization/ No consumermarkets • Intel, Motorola, Texas Instruments INTERNATIONAL • Transfer valuableskills and products (corecompetencies) toforeignmarketswheretheylack. • CentralizedProductDevelopment at home • Xerox, Microsoft

12. The Strategy • Localization Strategy: • Customizing goods and services to provide a good match to tastes and prefeences in different national markets • Appropriate when cost pressure is not too intense and consumers’ taste and preferences differ substantially across nations. • Transnational Strategy: • Customizing goods and services to mach local tastes and preferences while simultaneously facing strong cost pressure. • Attractive theory, but difficult to pursue in real life due to conflicting demand on the company. • Key issues to pursue: • Location economies and Experience effects • Leverage products internationally • Transfer core compencies and skills within the company while paying attention to pressures for local responsiveness Figure 12.8 Changes in Strategy over Time High Global Standarization Strategy Transnational Strategy Pressures for Cost Reductions Localization Strategy International Strategy Low Low High Pressures for Local Responsiveness As competitors emerge, these strategies become less viable

13. TheEncore

14. Current Events • Two highly integrated ”ecosystems” • On the development of long-form content for traditional television • The Hills, The City, 16 and pregnant, America’s best Dance Crew, MADE, My Super Sweet 16, MTV Unplugged, Cribs, The Real World, Paris Hilton’s my new BFF. • Broadcasted worldwide + conceptions • On the development of short-form video, music and news content both for linear television and for VOD, broadband, wireless and other digital platforms • More localized programming • MTV2 – Music television • Ads and commercials

15. Questions? ThankYou