Transcript Global Strategy

Global Strategy
Global Strategy
 Strategy:
“the action managers take to attain the
goals of a firm”
– General purpose: maximize/make profit
 Differentiate products, increase price: add
value, features, quality, service
 Achieve low cost
– Key means: allocation of scarce resources to
attain goals
Activity Value Chain
 Firm
as a chain of discrete value creating
activities
– Primary
upstream activities, manufacturing
 downstream activities: marketing, sales, after
sales service

– Support
infrastructure (general and administrative)
 human resources
 research and development

Global Expansion Benefits



Earn greater return from distinctive skills, core competences
– Inimitable or difficult to imitate skills in value chain
Realize location economies
– Choice of FDI location
– Create multinational network of activities (global web)
Realize greater experience curve economies, which reduce the cost of
value creation
– Learning effects, economies of scale
Unit costs
Experience curve
B
A
Accumulated output
Pressures for Global Integration
& Local Responsiveness
High
Cost Reduction
(Global Integration)
Pressures
Low
Low
Local
Responsiveness
Pressures
Ball bearings,
wheat
Cosmetics, food,
household goods
High
Differences in
- consumer tastes/preferences
- infrastructure/practices
- distribution channels
- host government needs/requirements
Strategic Choice
High
“Global”
Strategy
“Transnational”
Strategy
“International”
Strategy
“Multidomestic”
Strategy
Cost Reduction
(Global Integration)
Pressures
Low
Low
Local Responsiveness Pressures
High
Multidomestic MNC
HK
UK
Chile
USA
India
Japan
Mexico
Decentralized Federation - Many key assets, responsibilities
and decisions localized
Personal Control - Informal HQ-Sub relationship, simple financial controls
Multidomestic Mentality - Management sees overseas operations as
portfolio of independent businesses
International MNC
HK
UK
Chile
USA
India
Japan
Mexico
Coordinated Federation - Key assets, responsibilities decisions localized
Administrative Control - Centralized HQ control, formal planning and
control, tight HQ-Sub linkage
International Mentality - Management sees overseas operations as
appendages to a domestic operation
Global MNC
HK
Chile
UK
USA
India
Japan
Mexico
Centralized Hub - Most strategic assets, resources, responsibilities
and decisions centralized
Operational Control - Tight HQ control of decisions, resources, information
Global Mentality - Management sees overseas operations as delivery
pipelines to a unified global market
Transnational MNC
HK
Chile
UK
USA
Japan
India
Mexico
Networked Organization - Distributed, specialized resources and capabilities
Interdependent Units - large flows of components, products, resources,
people, and information
Transnational Mentality - Complex process of coordination and
cooperation in an environment of shared decision making
International Strategic Alliances

Cooperative agreements between competitors from
different countries
– Advantages

Facilitate entry into a foreign country

Allow fixed costs of new products and processes to be shared

Bring together complementary skills and assets

Help establish industry standards in technology

Allow reduction of operating costs,e.g., shared training,
purchasing
– Disadvantages

Give competitors a low cost route to new technology / markets

Disproportional benefit accrual to partners
Making alliances work which partner?

A suitable partner
– Helps achieve strategic goals
Adds needed, valuable capabilities
– Shares the firm’s vision for purpose of the alliance
– Is not likely to exploit the alliance to its own ends

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Steps to select a partner
– Thorough background check via public sources
– Advice from third parties who have personal
experience with likely partner(s)
– A lot of face-to-face time with likely partner(s) in
their environment
Making alliances work - What Structure?
 Protect
technology/know-how that is not
intended to be transferred
 Draw
a solid contract with safeguards against
opportunism
 Achieve
equitable gain through agreed swaps
of technology the other wants
 Seek
creditable, clearly articulated
commitment to partner “behavior” a-priori
Making alliances work - How to manage?

Show sensitivity to cultural differences that
explain different managerial styles

Build trust
– Set up framework for formal and informal face-
to-face meetings to create a common value system
– Build informal network of personal relationships

Learn from partners
– Apply the knowledge within your own
organization
– Brief your employees on partner strengths