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Global entrepreneurship and current crisis | Interview with Jonathan Liu

Our Marketing executive Gunjan Talwar recently spoke with a Professor of Global Business Management, Jonathan Liu. The dialogue covers a range of topics like entrepreneurship, implementing a global strategy for business expansion and pricing of the products and services.

Read more about Jonathan here:

Gunjan Talwar: Does developing an international strategy, or even a global strategy, matter for a small or medium sized business or a start-up?

Jonathan Liu: For medium sized business or start-ups, I would say it is important to have a ‘game plan’ as opposed to a full-fledged strategy, but you certainly will need some sort of plan. I think the crux of the problem depends on the industry that you are in and depending on how much funding you have available and the rationale for going international or global. The reason why I think having a ‘game plan’ is more useful for SMEs or startups is because for them to try and produce a ground-breaking strategy will cost them more than what they will actually gain in return. From my experience of looking at businesses that are startups, they tend to operate with just one or two clients. They usually start up international operations with one overseas location, and as time develops, they might then add on another location or country. They might then decide that they are far better off outsourcing the manufacturing or production somewhere else. They might have distribution and marketing operations from a third country. This is where you would want to have some form of formal three year or five-year plan and therefore a formal written down strategy.

I think to answer to your question, it is important to have something in writing that you do you commit yourself to, because this is quite easy. Once you start getting going and you are busy with the operations, you forget what you do or why you are doing it.

Gunjan Talwar: How important is it for business professionals to, understand international strategy and how they embed the strategic decision-making?

Jonathan Liu: Well, in terms of understanding, international strategy, you are working with the assumption that the company is thinking about internationalizing.

I would say it is probably more useful for organisations or professionals to understand the nature of competition. Take for example, I teach Entrepreneurship and development of new products and marketing new products. For an organisation who wants to enter the market in China, they need to appreciate that all the marketing channels are different, there is no Facebook, no Instagram, because the Chinese have their own social media channels. But what people don’t kind of think of is that, if they are trying to market in China, the focus should be on what the organisation is trying to market to the customers? And where are these customers based? The key is to think about the nature of competition and in most instances, the word of mouth is one way to overcome this.

The important thing is to understand what the nature of competition in the countries is or in the spaces that you want to try and position your products. Covid-19 is a fantastic example about disruption. It is totally disrupting everything and anything you can think of. The business model now is becoming more and more entwined with mobile technology in the era of Industry 4.0, which is to utilize the technology that is at hand, and this will continue, and one of the things I would certainly advise companies, if they’re just looking at internationalizing, they just think about how they can utilize, artificial intelligence, to do the things they want to do. It is a bit like, before you penetrate a country, you really need to get all your feelers out. You need to do the market research and I think there is quite a lot of evidence that shows that companies that do a lot of market research before they enter a new market, they tend to do a lot better because then they understand the culture, the nature of competition, and the customer needs.

Gunjan Talwar: How do you begin building a global organisation? Where do you start from?

Jonathan Liu: Well, I think where you start is, you do two things that are important. The first of which is people, the resources and trying to attract the talent.

I run entrepreneurship classes at Regents University London and one of the things I always say to my students, is that the greatest challenge that they face, is to employ people that are much smarter than they are and then to get them to work their socks off for them. Talent identification, understanding your people, the people that you go to work with, that network element becomes important. The old cliche is like, oh, it is not what you know, it is who you know. I think in some ways it is still true, but it is true because you cannot do business with people that you don’t trust. I think having this development of trust starts them in the right footing. The other aspect of it is about, identifying what do customers want? The old cliche in marketing was, can you identify the customer’s desires? You can identify what people really want. You do not have to sell it, they will queue up and again, you look at a lot of the product lines that are that sell very well. They capture people’s imagination and make people understand that that is the way that they should develop the product lines.

Many organisations are now using AI and VR to help us help make the customer’s journey better. For example, the clothing line Zara introduced an augmented reality experience at 120 of its stores worldwide, which aims to engage its consumers in an entirely new way. The campaign saw Zara temporarily ditch its mannequins in favour of AR versions of real fashion models. Customers both inside and outside the stores could view AR activation via the Zara AR app for iOS and Android. I was involved in a project with British Airways about two, three years back now. I sit on board of a Chinese charity that looks at Heritage and British Airways approached us because they wanted to run this showpiece exhibition in Hong Kong to celebrate its 80 years of travelling between London in Hong Kong, which was really fascinating. When we started working with different technologies in Hong Kong, they came up with this thing called a magic mirror. What it basically was that they could superimpose you all the uniforms and then they would take a picture of you, and all of this was done digitally using algorithms. This gave the visitors an experience of wearing the British Airways uniform without actually wearing one.

Going forward the organisations that can tap on to technology and understand how artificial intelligence and technology will help us will really be the winners because the nature of competition really has changed now.

Gunjan Talwar: How pricing of services and products is important in international expansion?

Jonathan Liu: What I would say is that most people misunderstand the pricing issues. Then academics and practitioners, confuse things even more, because what we do is, we label things. But to answer your question succinctly, I think it is important to understand the message that pricing comes out as. So, for example, I am going to sell you this diamond ring for three million U.S. dollars and there is a cheaper version, which is two hundred thousand dollars. Now they could be identical rings and the feeling you would get is hang on, if it goes from three million down to two hundred thousand, maybe it is fake, maybe it’s stolen property. The point is, it is not pricing, it is really about the message that you want project out.

There are lots of companies today and they will produce products that are at the leading edge, that are very luxurious and, because it matches the desires and aspirations. they can then actually offer it at a much higher price. The traditional way of thinking about pricing was cost plus and if there is if there is a high demand, you could charge significantly more because of people’s perception. I think that the best example today, your audience would relate to is look at the battle between Apple and Samsung. They both produce products that are very similar in price, but when you look at the actual costs of production and actually producing the product, you would be absolutely flabbergasted looking at how much their margins are. That is basically because they are perceived to be the best in market. When you look at other competitors that may want to come in, they will find it difficult to try and price the product at that level, so some of them will try and price it lower and that’s where they make the mistake. The low pricing sends out a different message, it sends the message that, maybe the product is not as good as the other products that are highly priced.

Gunjan Talwar: What if the company has set a low price because their target audience is different? They could target a middle-income family rather than a high-end business owner or a rich business owner in it?

Jonathan Liu: It really depends, again, what I would call the game plan. What does the company want to do? How do you compete with a company which is prepared to give away its product free?

Most of the smartphones now have a G.P.S. system. In the good old days, for the G.P.S. system, you would have to pay for it. Today, it is available for free. So how can you compete then because the message that they are sending out is this is a gift to you. The pricing strategy adopted is, I will give this to you for free, but I will make my money from advertising, product placement and so on, so forth. But the market space is only so big and that is why you then find that that the most dominant will tend to survive.

Gunjan Talwar: With the pandemic, how are businesses adapting their international or global strategies?

Jonathan Liu: I think now it is really, too soon to tell because we are in the early stages of the pandemic. I was listening to a news broadcast today which was about comparing what is happening in the West and what is happening in East or what is happening in Europe as oppose to Asia, and how are all at different stages of the pandemic, but there are some commonalities which is, that it has a severe impact on everybody’s economy and you can’t get away from that now. It is so globally integrated what Covid-19 pandemic has done, it has forced the organisations to really become more inventive, become more entrepreneurial in thinking about the type of products and services that they are going to deliver. The minute the pandemic was announced, the first thing universities decided to do, was to move away from face to face class delivery. It is still transitioning to online delivery method and still experimenting with the delivery. What I think it’s for sure is that Covid-19, is really a disruptor and the question raised is, how do you utilize this disruption to increase your productivity and increase your propensity to sell to products or to engage with your clients all day?

Gunjan Talwar: How do you think global strategy will evolve over the next five years, and what could be the possible trends that you see in the education or the e-learning industry?

Jonathan Liu: First and foremost, this pandemic impact is not going to be something like a two-year cycle. It has changed the way in which we operate and will have a much longer impact.

I think now most people are just hoping that we would revert to some form of normality. But I think it should not be misunderstood. Although as terrible as Covid-19 is, it is the normal series of disruption, that has shaken down everything. The question now is, how do you go forward and execute you game plan?

The answer to your question is difficult, to think about what it is going to be happening, but like, any dark cloud, there will always be a silver lining. There will be opportunities to do things that are different and offer services that was no available before or delivered in a different way. New products will be developed and for sure they will go to market much sooner than in the past as organisations will need new sources of income.

Gunjan Talwar: What are the critical elements of a successful global strategy?

Jonathan Liu: The relationship that you and your client would have and how you satisfy their product or service needs. There are universities like Harvard who have offered the executive courses free of charge. You only pay a small fee to get a certificate that says you have done it and you got to do all the assignments. Lots of people have just signed up because they like the idea that they are doing something. Harvard is very smart because they are working on the basis that like let me give you a free sample and you will do more if you like it. The customer tries it and finds out that it is not that difficult and probably will come back and do some more.

I think the key driver is that you have a long-term view on a lot of institutions at the moment are reacting in danger, immediate dangers of cash flow, so they are shedding staff and sacking people. British Airways recently announced 12000 people will be made redundant. So how are you going to recruit back 12000 people, a short span of time when all this pandemic is over. You cannot do it overnight when you do not try and bring them back on-board. Some of them would say, no, I am not going to work, because you didn’t look after me and I think this is really now the challenge, the defining issue. It is important on how you treat your employees.

Gunjan Talwar: How does an organisation manage to be personal yet not exclusive in its global marketing strategy?

Jonathan Liu: Well, I, I think this, again, really depends on the technology they use. This also depends whether they are smart enough to draw in things like artificial intelligence, virtual reality. For example, when you buy products online, say from Amazon, after a few days you will notice recommended products being shown or what other customers have purchased along with the product. They are basically advertising. They are selling things that you may not want to buy but this to enhance the customer experience. This is where I think a lot of organisations now are looking at what is called Big Data. They are doing all sorts of analysis to try and look at how people behave. I think what Covid-19 has done is getting people to think through all possible ways. So how do you connect with them? How do you personalize the service? Because if you can personalise the service, then people will stay with you. I think that’s where the bottom line is. Remain loyal and they will start purchasing more of your products and services.

Gunjan Talwar: Do you think positioning customer experience is an important enabler to succeed internationally?

Jonathan Liu: Straight out, yes because if you can understand what your customers want, then you can deliver a product or service even before they ask you and that is where you get a strong competitive advantage. You know, I, joke with my students and say to them that if you look at universities, they are really very smart because they have products that they sell to the customer chain.

They create a variety of programmes for students to take, but you can only do maybe one or two undergraduate degrees. The university will then say, you have done that now, maybe you should do a Masters, that is the second product and again, maybe one or two Master level programmes. After this you maybe even be tempted to do a doctorate, a PhD and this is the pinnacle of learning and who would want to do it.

I think, aspiration, is the pinnacle of where the new markets should be.

Gunjan Talwar: How important is corporate responsibility when expanding a business globally?

Jonathan Liu: What you want to do is to have a full understanding of all the implications of your actions. I think in a nutshell, I would say it is important because the generations are aware and becoming more vigilant towards what organisations are doing.

See around and look how has the environment changed during this pandemic? It has improved, the skies are bluer, it is at the lowest pollution level, probably because all the factories are shutdown, there is no vehicle emissions as the world is in lockdown.

I hope what Covid-19 will do is to make people understand what the governance issues are and how we look after the environment in which we live in.