SPPTChap010 - Robert Cascio, PhD
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Transcript SPPTChap010 - Robert Cascio, PhD
Chapter 10
Global Strategy: Competing Around the World
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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Chapter Outline
10.1 What Is Globalization?
• Stages of Globalization
10.2 Going Global: Why?
• Advantages of Expanding Internationally
• Disadvantages of Expanding Internationally
10.3 Going Global: Where and How?
• Where in the World to Compete? The CAGE Distance
Framework
• How Do MNEs Enter Foreign Markets?
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Chapter Outline (cont’d)
10.4 Cost Reductions vs. Local Responsiveness: The
Integration-Responsiveness Framework
•
•
•
•
International Strategy
Multidomestic Strategy
Global-Standardization Strategy
Transnational Strategy
10.5 National Competitive Advantage: World Leadership
in Specific Industries
• Porter’s Diamond Framework
10.6 Implications for the Strategist
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ChapterCase 10
©STR/AFP/Getty Images/Newscom
Hollywood Goes Global
Hollywood movie: The quintessential American product
• However, non-U.S. sales increased: 50% in 2000,
AND
70% in 2012
Altered global strategic focus
• Movies that fit the global market by adapting foreign scripts,
hiring international actors/actresses
• Two versions of Iron Man 3 in 2013 (one just for China)
Treat emerging markets as focal targets
Not just filmmaking industries, but also electronics industry
(ex: Korea, China), and auto industry (ex: India)
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Exhibit 10.1 Lifetime Revenues of
Hollywood Blockbuster Movies
>$500 million (in $ million)
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10.1 What Is Globalization?
Globalization is a process of closer integration and
exchange between different countries and peoples
worldwide.
Made possible by:
• Falling trade and investment barriers
• Advanced telecommunications
• Reduced transportation costs
• Importance of MNEs and FDIs
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Exhibit 10.2 Globalization 3.0:
21st Century
Based on an optimal
mix of costs, skills, and
PESTEL factors, MNEs
are organized as
globalcollaboration
Networks that perform
business functions
throughout the world.
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WHAT DEFINES A U.S. COMPANY?
Address
• IBM, GE, and others are U.S. companies…
Despite the fact that a majority of their employees work outside
the U.S.
Investment
• Carmakers from Japan (Toyota, Honda, and Nissan) and
South Korea (Hyundai and Kia) and engineering
companies (Siemens from Germany, and ABB)
All have made significant investments in the U.S.
Also created a large number of good jobs
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10.2 Going Global: Why?
Gain access to a larger market
• MNE has opportunities for economies of scale and scope
• Firms in smaller home markets (Acer, Nestlé, Samsung)
Gain access to low-cost input factors
• Labor, natural resources, technology, logistics.
• Professionals less expensive in China & India
Develop new competencies
• Location economies- Cisco, AstraZeneca, & Unilever
• Polycentric innovation strategies
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Strategy Highlight 10.1
Does GM’s Future Lie in China?
Market opportunity in China
• 1.4 billion people; only 1 in 100 people owns a vehicle
GM entered China in 1997.
• Joint venture with Shanghai Automotive Industrial Corp
Sold 1.4 million vehicles in 2012.
• China makes up 25% of GM’s revenues and GROWING fast.
• GM China factories are more productive than U.S. plants.
70% of GM revenues – OUTSIDE the United States
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Disadvantages of Expanding
Internationally
Liability of foreignness
• Additional cost of doing business in an unfamiliar cultural
and economic environment
Loss of reputation
• Globalizing a supply chain can have unintended effects
Low wages, long hours, poor working and living conditions
• This challenge directly concerns the MNEs’ corporate
social responsibility (CSR)
Loss of intellectual property
• Large-scale infringements in software, movie, & music
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Strategy Highlight 10.2
Walmart Retreats from Germany
Walmart entered Germany.
• Acquisition of 21 stores and 74 hypermarkets
Walmart duplicating its U.S. policies and applying
them in Germany
• Employees refused to accept those policies.
Walmart faced significant cultural differences.
The result is a defeated Walmart that sold its stores to
Metro… Walmart’s key rival in Germany!
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Where in the World to Compete?
The CAGE Distance Framework
A decision framework based on the relative distance.
between home and a foreign target country
Along four dimensions:
1.
2.
3.
4.
Cultural distance
Administrative and political distance
Geographic distance
Economic distance
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HOFSTEDE AND CULTURAL DIMENSIONS
Hofstede’s national-culture research work provides a
useful tool to proxy cultural distance.
Based on data analysis from more than 100,000
individuals from different countries, four dimensions
of culture emerged:
•
•
•
•
•
Power distance
Individualism
Masculinity–femininity
Uncertainty avoidance
Long-term orientation (fifth cultural dimension added later)
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How Do MNEs Enter
Foreign Markets?
Remaining decision: How to enter a foreign market
Low investments and low level of control:
• Exporting
• Licensing
• Franchising
High investments and high level of control:
• Joint venture
• Acquisition
• Greenfield operations
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10.4 Cost Reductions vs. Local
Responsiveness:
The Integration-Responsiveness Framework
Two opposing forces when competing globally
Cost reductions versus local responsiveness
Cost reduction:
MNEs enter global market place with the intention to reduce operation cost
− Globalization Hypothesis
Ex: Toyota Prius
Local responsiveness:
Tailor product and service offerings to fit local consumer preferences and
host-country requirements
Higher cost
Ex: McDonald’s uses mutton in India
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Exhibit 10.6 Dynamic Strategic
Positioning: The MTV Music Channel
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10.5 National Competitive Advantage:
World Leadership in Specific Industries
Death-of-distance hypothesis:
• Geographic location alone should not lead to firm-level
competitive advantage because firms are now more able to
source inputs globally (ex: capital, commodities, etc.)
Labor markets also have become more global.
Computer manufacturers – China & Taiwan
Consumer electronics – Japan & South Korea
Mining companies − Australia
Why are certain industries in some countries more
competitive than in others?
• Answer: National competitive advantage
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Porter’s Diamond Framework
Factor conditions:
A nation’s endowments in terms of national, human, and other
resources.
Demand conditions:
Specific characteristics of demand in a firm’s domestic market.
Competitive intensity:
Highly competitive environments tend to stimulate firms to outperform
others.
Related and supporting industry:
Leadership in related and supporting industries can also foster worldclass competitors in downstream industry.
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Exhibit 10.8 Porter’s Diamond of
National Competitive Advantage
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10.6 Implications for the Strategist
The CAGE framework helps with global strategy
decisions.
Business-level strategy provides clues to possible global
strategies.
Despite globalization and the Internet geographic
location has maintained its importance.
The enduring competitive advantages in a global
economy lie increasingly in local things:
• Knowledge, relationships, and motivation that distant rivals
cannot match
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ChapterCase 10
©STR/AFP/Getty Images/Newscom
Consider This…
• The Hollywood film industry enters global market to explore
new revenue stream!
• Will we see a decrease in the production of regional and
U.S.-centered movies? Or will small independent movie
producers pick up a higher share of the domestic U.S.
market?
• What are some alternatives to combat piracy?
• How would you prioritize which nations to expand
distribution into if you were working for a major Hollywood
movie studio?
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