Chapter Two

The Global Business Strategy Framework in Practice:
War Stories*

 

The IBM story
The principal practical focus of this Volume will be on the bottom right-hand box of Figure 2.1, Develop Go-to-Market Plan (not shown in this extract). By way of background, your author, along with Professor David Shipley of Trinity College Dublin, Ireland, was requested by the Chartered Institute of Marketing (CIM) in the UK to work on establishing a marketing professional development programme for IBM’s EMEA (European, Middle East and Africa) division. The original ambitions were modest in the context of the size of the IBM corporation. The training was designed to create a cadre of marketing professionals within the organization who would achieve the CIM Advanced Certificate in Marketing, a globally-recognised high-level qualification. This was 1993 and coincided with the commercial meltdown in IBM described in Bitesized Volume One, Ten Years That Shook the (Capitalist) World: A Brexit Antidote. Within a year the programme was trialled in the US shortly after the arrival of Lou Gerstner as CEO and Abbey Kohnstamm as Chief Marketing Officer (CMO) as ‘change agents’ to craft a company turnaround (Garr, 2000). These new executives immediately recognised that a customer-focused transformation programme was needed and that IBM EMEA just happened to have a highly credible education initiative successfully up-and-running, primarily being delivered in Belgium and the UK for regional participants. It was your author’s Honda moment™ (right place, right time etc – see BiteSized Volume Three, Strategic Marketing and Global Brand Management) and over the next nine years the programme was delivered worldwide under the banner of the IBM University by your author, Prof. Shipley and a small faculty of marketing and strategy professors. The educational component was expanded to include a career personal development (CPD) path for participants which would allow them to progress towards achieving the coveted CIM Professional Diploma and, for the truly dedicated, a master’s degree at Manchester Business School in the UK. Three things arose from this experience:

    1. To achieve the initial qualification participants were required to attend two intensive five-day residential courses and undertake a number of in-company written assessed assignments based on their local market conditions. It was a tremendous teaching experience delivering exactly the same course, written to a tightly drafted curriculum, in a diversity of countries. The different learning styles were extraordinary to observe. For example, the same five-day course could have lasted for much longer in New York without ‘strict’ facilitation and only three days in South Korea in the absence of careful nurturing of class participation.
    2. A recognition that it is possible to achieve rapid organizational transformation if it is focussed at a functional level, particularly in global corporations where the goal is to achieve a common way-of-working with a common vocabulary (in this case marketing, not English) and common processes. IBM’s own marketing processes and methodologies were ‘embedded’ within the educational components of the certified programme and workshop-style activities were included as part of ‘classroom’ sessions.
    3. Of most importance for the core elements of this Volume, the cumulative experiences of working so intensively over a prolonged period of time with senior marketing professionals from an international company operating in many countries and across IBM’s three major divisions – hardware, software, services – and combining established marketing principles with textbook and company-specific methodologies, frameworks, processes and tools, gave deep insights into the real-world practice of strategic marketing management in a complex global business organization. We would exalt the participants to apply the tools with a very assertive directive: “it works!”. And it does.

Our contribution with the successful worldwide delivery of the IBM Marketing University between 1994 and 2002 doesn’t feature in Douglas Garr’s 2000 bestseller IBM Redux: Lou Gerstner & the Business Turnaround of the Decade which is more about the man-in-charge than the army of employees worldwide who really transformed the company. But we may have helped, and Lou and Abbey did identify the need and pay the bill.

Big oil, small brand: The BP story
Speaking at a company ‘town hall’ event in Chicago in 2000, BP’s CEO Sir John (now Lord) Browne made the following observation to the assembled devotees:

In a global marketplace branding is crucially important in attracting customers and business. It is not just a matter of a few gasoline stations or the logo on poll signs. It is about the identity of the company, and the values which underpin everything that you do and every relationship that you have.

 John Brown had caught the brand bug, but he was worried. Every year the business magazine Fortune publishes a feature which lists the world’s top 100 brands, commissioned from the world’s leading brands consultancy company Interbrand. Company rumour has it that, while on a long flight, John Browne was reading the magazine and was ‘staggered’ to see that BP was only ranked 69, despite being one of the world’s largest companies by market capitalisation. An urgent memo was duly sent to Group Marketing, the company’s centralised marketing function based in greater London with responsibility for, amongst other things, managing the corporate brand: Browne wanted to be in the top ten the following year. Panic ensued at corporate HQ: it could never happen.

As with all such rankings, whether they are for the best business schools or the best MBA programmes or the top 50 funniest TV sitcoms of all time, it is essential to check out the methodologies used, the assumptions made, and the variables measured. Interbrand is a highly respected and credible marketing services agency but its ‘brand greatness’ methodology (for that is what it is, nothing at all to do with brand value) is seriously flawed. The technicalities are dreadfully dull but, suffice to say here, the Interbrand methodologies are biased heavily against organizations with high fixed tangible assets (book value) and towards those with strong intangible assets, crudely measured by market capitalisation-to-book value. Which is why Coca-Cola was the number 1 global brand year-after-year for many decades: the Coca-Cola Corporation (CCC) has a relatively small marketing department and a secret recipe, leaving the vast majority of fizzy-pop production to independent ‘bottlers’ worldwide. Interbrand’s current number 1 global brand is Apple which has exactly the same business model as CCC: Apple do the designing (in sunny California), Foxconn do the dirty stuff (in smoggy Shenzhen, southern China). Of course, what Lord Browne should have looked for was BP’s position in the rankings compared to ExxonMobil and Shell. He would still have been disappointed.

While it is often good management practice to look outside a company’s industry to benchmark on best-in-class business processes, for example, brand management (P&G), key account management (IBM), innovation (3M), supply chain management (Amazon), enlightened HRM (John Lewis Partnership), disruptive technologies and business processes (A J Bell YouInvest) it is essential to benchmark against direct competitors when assessing things such as various measures of profitability e.g., ROE, ROCE, Gross and Net margins etc. and, in the BP case described here, relative brand ‘value’. Established, mature, oligopolistic industries typically develop an industry ‘recipe’ (Grinyer and Spender, 1979) wherein the technologies and business models are almost identical. Take BP, Shell and ExxonMobil. All three explore for oil, extract and refine it upstream; they ‘push’ it downstream and sell it through controlled, branded garage forecourts all of which accommodate some sort of convenience store and outside, if space permits, have an automatic car wash to squeeze a few extra cents from the property asset. There will be some proprietary technology to be leveraged upstream but for the most part rapid technology transfer across the oil and gas sector industries is the norm, hence the importance of exploration for upstream ‘market share’.

Big brand, small oil: The Castrol story
John Browne had indeed caught the brand bug, more of which shortly. But BP had a bigger problem. For years BP had neglected its lubricants brands, e.g. Duckhams and Veedol, regarding them as a necessary nuisance rather than as marketing assets (see BiteSized Volume Three, Strategic Marketing and Global Brand Management, for insights into global brands; and also, BiteSized Volume Five, Implementing Global Business Strategy, for the discussion of the multiple dimensions of marketing assets and how to measure their strengths and weaknesses). But they did establish a global joint venture with oil major Mobil to distribute its Mobil 1 high-end lubricant worldwide on BP forecourts and they learned to love the margins the category enjoyed. However, Mobil was acquired by Exxon and had to unravel many of its alliances and dispose of assets due to the intervention of competition and anti-trust regulatory authorities. BP was attracted by the FMCG stability of branded lubricant’s earnings as compared to the volatility of petroleum margins and wanted to plug the gap left by Mobil’s departure. By far and away the world’s most successful lubricants brand was (and remains) Castrol, the jewel in the crown of publicly listed company Burmah Castrol. Just for fun, see Figure 1 below which features some of Castrol’s worldwide endorsements and consider what the following have in common:

    1. Sachin Tendulkar, India cricket icon
    2. A Honda MotoGP works team motorcycle
    3. A ‘Pimp my Ride’ poster (an MTV programme which ‘funks-up’ teenagers’ old bangers)
    4. The rolling stones ‘Tongue And Lips’ logo
    5. A wrestler representing World Wrestling Entertainment (WWE)
    6. A footballer!
Figure 1: Think global, communicate local!

With the exception of the ‘Tongue And Lips’, they all closely align with key Castrol global consumer segments:

    1. Scooter, motorcycle and tuk-tuk owners in India
    2. Tech-geek hi-end motorcycle owners worldwide
    3. Young American consumers passionate about their supercharged old cars
    4. Non-disclosure precludes identification!
    5. ‘Red-neck’ truckers in Texas who strip down their engines and reassemble them for fun, every weekend but only after watching the wrestling
    6. English Premier League ‘passionates’ (mostly scooter owners) in Southeast Asia, where David Beckham was venerated at the time of the sponsorship. (As an aside, Real Madrid paid £23m for Beckham in his latter playing years, in large measure to build the club’s brand in Asia, and not for his deteriorating soccer skills)

This Castrol story is an excellent example of the standardisation/adaptation discussion relating to the strategic marketing mix presented in BiteSized Volume Three, Strategic Marketing and Global Brand Management:

    1. High-quality product/premium price (standardised global brand positioning);
    2. Locally adapted communications;
    3. ‘Hybrid’ distribution channels (retail/workshops/forecourts etc.) to reflect local market conditions.

Castrol is a truly global brand, one which marketing professionals would describe as a ‘category killer’. And BP acquired it, solving its product/brand portfolio gap in a thirty-minute meeting between the two corporate CEOs.

BP paid a pre-bid market capitalisation premium of £2bn for Burmah Castrol, primarily for Castrol since the other assets had little market worth above depreciated asset estimations, proving again that you can only put a true value on a brand when it is sold to a willing buyer. BP didn’t need to justify the acquisition of Castrol – or the premium it paid – to investors since the £12bn cost was dwarfed by the cash which it had available on its balance sheet. But it did so anyway, claiming in an interview with the Financial Times that it was acquiring Castrol for its world-renowned marketing capabilities, not just its brand portfolio. John Browne had made a very public commitment in his own personal performance appraisal to transform BP into a customer-focused, market-driven organization along the lines of the philosophy underpinning his Chicago speech cited above.

At the time of the acquisition, the author had been working with Castrol worldwide for eight years and was invited to share this experience, along with that of the IBM Marketing University, to senior BP executives at corporate HQ. The management development requirement of BP was exactly the same as that of IBM, the organization was similar in terms of global reach and complexity, our service offer was our intellectual property and therefore ‘good-to-go’ for delivery in BP under a broader initiative which became the BP Sales and Marketing Academy. And so began another journey of discovery for the author and a small faculty to deliver the same curriculum-based professional marketers’ educational programme worldwide, the only adaptation required being to embed BP’s methodologies and processes in place of those we used with IBM. Which, to be frank, were very similar, as might be expected.

References

Garr, D. (2000). IBM Redux: Lou Gerstner & the Business Turnaround of the Decade. London: John Wiley & Sons.
Grinyer, P. H., & Spender, J. C. (1979). Recipes, Crises and Adaptation in Mature Business. International Journal of Management and Organisation, IX(3), 113-133.

 


*This is Chapter Two, ‘The Global Business Strategy Framework in Practice: War Stories’,  of BiteSized Fortress Europe Volume Four,  A Practical Framework for Global Business Strategy Success. Please click/tap the Strategic Management Think Tank tab on the Main Menu for details of all five Volumes in the Series.

 


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All content © Colin Edward Egan, 2020