Transcript Business Strategy-Global Trends

Business Strategy Lecture 10 Global Trends
John Birchall
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International Expansion
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Link to inside-out perspective – and to the challenge
of growth (Lecture 7: expansion by seeking new
markets is just one growth option)
Early stages of internationalisation:
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Delivery of value founded on existing competences
Organisation seeks new customers for an established
product or service
Operations stay domestic; sales offices or joint ventures are
set up abroad
International divisions may follow, bringing the
organisation closer to each market – outside-in
Multi national Growth
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Operations move abroad
Production facilities and service centres
are established
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Closer to customers
Closer to sources of raw materials
In regions with well-trained and/or lowpaid workers
In regions with excellent infrastructure
Global Integration
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Aim: to co-ordinate sales and/or operations in a wide
range of countries
Method: divisional, matrix or tran-snational structure?
Examples: few Western success stories
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Japan is famous for the ‘centralised hub’ (Honda)
many American firms have global brands, few are globally
integrated
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Xerox is one exception (Harrison 2003: 345-347)
European firms are traditionally decentralised with strong
foreign subsidiaries
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A few have strong integration within functions, but their
branding is weak (Philips Electronics NV, Unilever
Choices and Strategies
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Divisions: Product, Country/Market or Functional, with varying
levels of central co-ordination and control
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Support an expansion strategy using capital from global financial
markets
Involve choices and trade-offs
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Global branding or local positioning?
Inside-out efficiency or Outside-in responsiveness?
Corporate Matrix: combines two dimensions
Transnational Network: three-dimensional
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supports an integrated (hybrid) strategy of both product and
market development
Firm seeks both global efficiency and local responsiveness
Communications must be excellent (Stacey 2003: Ch. 16)
The Three Dimensions of
A Transnational Structure
In-car entertainment
Home entertainment
Hand-held gadgets
U.S.A.
Asia
Marketing
Operations
Research
& Development
Europe
(Harrison 2003: 315)
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Network Structure
Office
Office
Office
Regional Offices:
Develop specialized
resources and
capabilities
Office
Information
Centre
Office
Office
Flows of components, products,
resources, people and information
Flows of people and information
supporting a complex process of
shared strategic decision making
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Relationships with Other Firms
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Remember Porter’s Five Forces?
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Industry attractiveness
Choice of competitive position
Porter went on to write The Competitive
Advantage of Nations (2nd edn 1998.
Basingstoke: Palgrave)
This gives us Porter’s Diamond
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Attractiveness of countries to certain clusters
of firms
Examples: German cars, Swiss chocolate,
Hollywood and Bollywood
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Porter’s Diamond:
The Basic Model
Firm Strategy,
Structure and
Rivalry
Factor
Conditions
Demand
Conditions
Related and
Supporting
Industries
Source: Adapted with the permission
of the Free Press, an imprint of Simon &
Schuster Adult Publishing Group (see
Harrison 2003: 351 for complete
reference)
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Compare: Porter’s Five Forces
Potential Entrants
Threat of
new entrants
Bargaining power
of suppliers
Industry
Competitors
Bargaining power
of customers
Customers
Suppliers
Rivalry Among
Existing Firms
Threat of
substitute products
or services
Substitutes
Source: Adapted with the permission
of the Free Press, an imprint of Simon &
Schuster Adult Publishing Group (see
Harrison 2003: 53 for complete
reference)
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The Diamond…
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Adds in Factor Conditions
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Keeps a strong emphasis on Customers
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Link to the search for raw materials, workers and
supporting infrastructure
Link to the outside-in perspective: market
demand conditions
Downplays the threat from Substitutes and
New Entrants
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Link to emerging theories of networks and
strategic alliances: stress on clusters and on
Related and Supporting Industries
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The Challenge of Culture
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Cross-cultural communication
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Difficult yet vital
For emergent strategy to be effective, staff must
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understand the leader’s vision
speak their own minds
be heard and understood
Successful strategic alliances need it too
Barriers to communication across
cultures:
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language
customs
style
respect
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Men are from Mars, Women
are from Venus…
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Cultural issues are not only important in
international business
In all organisations culture influences
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How we make sense of our own experience
How we put our reflections into words
Whether our colleagues and managers can
hear what we say
Whether they want to listen
How they understand
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