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WINNING GLOBAL MARKETS: HOW BUSINESSES INVEST AND PROSPER IN THE WORLD'S HIGH-GROWTH CITIES
Authors: Philip Kotler, Milton Kotler
Publisher: Wiley
Price: $30
Isbn: 9781118893814
Every product and service has an extensive supply chain for production, sales, and after-sale service and maintenance. These chains are unique to each industry and to each company within an industry. The supply chain of production and sales is a cost and quality concern to companies. The after-sale supply chain is a customer satisfaction and loyalty concern to companies and produces additional revenue.
Supply chains for production are complex, involving many independent businesses that supply parts, components, and systems for the assembly of final branded products that go to market. The classic American automotive production supply chain was Detroit. All three of the top US carmakers were located in the Detroit city region, along with many major parts and component suppliers. The entry of foreign auto production into the southern region of the United States, with its nonunion labor market and lower cost structure, challenged Detroit's auto hegemony. American consumers took to Japanese and European cars with gusto for their high quality and lower price relative to models by the American makers. The unionized supply chain became a competitive disadvantage, because foreign makers brought suppliers to southern production venues in Kentucky, Tennessee, and Alabama.
Even before the financial collapse of 2008 that bankrupted General Motors (GM), American carmakers mitigated union costs and opened some factories in Texas, Kentucky, and business-friendly Indiana. GM and Ford Motor intensified their international expansion to counter declining market share in the United States. GM is flourishing in China with its state-owned partner SAIC Motor. In 2013, GM sold more cars and trucks in China than it did in the United States, and a foreign market outpaced the automaker's domestic sales for the first time in its 102-year history. GM is now doing quite well; the big loser is Detroit.
Supply chains for sales are also complex, involving many independent intermediaries to promote, distribute, sell, and trade products to customers. American sales of foreign-made imports of American apparel brands go through a chain of production and distribution that may begin with textile fabrication in Bangladesh, design in Hong Kong, and cutting and assembly in China; then moves to importers to the US market; and from there spreads to warehouses, wholesalers, distributors, and finally to retailers. Companies of the magnitude of Walmart ship directly from foreign production centers to their own import logistic terminals, on to their own distribution centers in the United States, and then on to their stores. By owning its distribution and sales chain, Walmart gains great cost savings that enable it to sell to US consumers at the lowest price.
There is also an after-sale supply chain that requires many independent businesses to maintain, repair, and service the purchased brand product. This is of vital importance to high levels of customer satisfaction and brand retention. The linkage of all supply segments is called the value chain, and it is paramount to brand companies with respect to quality, innovation, cost, and customer satisfaction.
A city region has to provide competitive supply chain advantages to any company it endeavors to attract to its region. Cities are consolidating regional organizations to amalgamate suppliers into supply chains relevant to the core industries they are trying to build. The 10 largest distribution hubs in the United States are Memphis, Chicago, Houston, Los Angeles, New Orleans, the Panynj, Philadelphia, Mobile, Charleston, and Savannah. The distribution hubs play an increasing role in the assembly of final products to retailers, including repackaging, labelling, shipping, and information control.
One major difficulty that cities have in expanding their supply chain capacity is that each city region has a legacy business complex, which may or may not be suitable to new core industries and companies. For example, New York City has to handle the supply chains of three major industries-apparel and fashion, finance, and media. As explained earlier, New York is also leading in technology industry jobs. This poses a difficulty in collective agreement within the city region on the allocation of supply chain resources. As certain core industries decline in a city, there is great pressure to revive them with more dedicated supply chain resources. The tendency of legacy suppliers is to politically support the core legacy industry rather than to make way for suppliers of new core industries.
The legacy auto suppliers of Michigan and northern Ohio are trying to adapt to new generations of auto production, but in this case they are also trying to innovate new uses for their technology. There are fledgling information technology and media start-ups in Detroit, but is uncertain whether Detroit will or can find a new core industry to sustain the large city as auto production is reduced.
The greatest weakness in metropolitan economic development planning and business attraction is the lack of planning knowledge about the supply chain requirements of companies that the metropolitan area is trying to attract. Some metropolitan planning agencies are augmenting their staff with manufacturing and marketing specialists to better organize suitable supply chains for business attraction.
City regions in developing countries have a particular advantage in organizing supply chain clusters, because they are not burdened with legacy industries and legacy suppliers. China has a policy and network of SEZs that deliberately congregate domestic and foreign supply chains to support global and domestic MNCs and large companies.
Reprinted with permission from the publisher. Copyright 2014 by Philip Kotler and Milton Kotler. All rights reserved
MEET THE AUTHORS
- Philip Kotler is the SC Johnson and Son distinguished professor of International Marketing at Northwestern University's Kellogg School of Management, and one of the world's leading authorities on markets and marketing. He is also the co-author of Market Your Way to Growth, Good Works!, Marketing 3.0
- Milton Kotler is chairman of Kotler Marketing Group (KMG), headquartered in Washington, DC, and Kotler Marketing Group China, headquartered in Beijing. KMG China is recognised as the No. 1 marketing strategy consultancy in China. He is the author of A Clear-Sighted View of Chinese Business Strategy (2004) and co-author with Philip Kotler of Market Your Way to Growth
