STRATEGY IN THE GLOBAL ENVIRONMENT

1
STRATEGY IN THE GLOBAL ENVIRONMENT

• BUS 189
• SPRING 2007
• DR. MARK FRUIN

2
LANGUAGE OF GLOBALIZATION

• NATIONAL FIRM
• INTERNATIONAL FIRM
• MULTINATIONAL FIRM
• TRANSNATIONAL FIRM
• METANATIONAL FIRM
• GLOBAL FIRM

3
WESTERN ORIENTATION

• LANGUAGE OF GLOBALIZATION (INTERNATIONAL
  BUSINESS) IS BASED ON A WESTERN POINT OF VIEW
  INTERNATIONAL MEANS NON-U.S.
• HBS MULTINATIONAL RESEARCH PROJECT BEGINS IN 50S
• YARDSTICK OF INTERNATIONAL IS LARGE, AMERICAN
  FIRMS THAT WERE DOMINANT AT THE TIME WHEN
• EUROPE ASIA DEVASTATED

4
NEW POINT OF VIEW

• THOMAS FRIEDMANS, LEXUS THE OLIVE TREE THE
  WORLD IS FLAT
• SUGGESTS THAT
• BOTH THE NUMERATOR AND DENOMINATOR NEED TO BE
  RECONSIDERED
• NUMERATOR, ABOVE THE LINE, IS NO LONGER LARGE,
  AMERICAN OR EVEN WESTERN FIRMS
• DENOMINATOR, BELOW THE LINE, IS NO LONGER WESTERN
  ECONOMIES
• WHAT OTHER ECONOMIES?
• OF THE TEN LARGEST ECONOMIES IN WORLD, BASED ON
  PPP, HOW MANY ARE IN WEST?

5
ALTHO THERE ARE PROBLEMS

• FRIEDMAN TALKS A LOT ABOUT INFORMATION EQUALITY
  (INTERNET) AND MARKET ACCESS
• NEW RELATIONSHIPS BETWEEN INDIV INDIV, INDIV
  STATE, STATES STATES
• BUT FREE TRADE LESS BENEFICIAL TO DEVELOPING THAN
  DEVELOPED COUNTRIES
• THE WORLD IS NOT FLAT, BUT SPIKEY
• HARD TO KNOW WHAT BIG MULTINATIONALS ARE DOING
  HOW THEY BENEFIT

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GLOBALIZATIONS CONSEQUENCES

• INDUSTRY BOUNDARIES/COMPETITION ARE NO LONGER
  NATIONAL
• INTENSIFICATION OF RIVALRY IN MOST INDUSTRIES
• INCREASED THREAT OF ENTRY FROM OVERSEAS FIRMS
• NEW WORLDWIDE OPPORTUNITIES, BUT TAKING ADVANTAGE
  OF THEM NOT EASY

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WHY FIRMS GO ABROAD

• LOCATION ECONOMIES
• TO ACCESS MARKETS TAKE ADVANTAGE OF FACTOR
  INPUTS
• TAKE ADVANTAGE OF SUBSIDIARY CAPABILITIES
  COMPETENCIES
• TO BE MORE LOCALLY RESPONSIVE
• TO TAKE ADVANTAGE OF MARKET-LEADING CAPABILITIES
• PRODUCT LIFE-CYCLE MODEL
• FIRST-MOVER FAST-TO-MARKET

8
4 BASIC STRATEGIES, p. 276, 281

• BASED ON WESTERN ORIENTED RESEARCH BECAUSE MODEL
  IS STAND-ALONE FIRM
• INTERNATIONAL STRATEGY
• COSTS REDUCE LOCAL RESPOND LOW-LOW
• MULTIDOMESTIC/LOCALIZATION STRATEGY
• COSTS REDUCE LOCAL RESPOND LOW-HIGH
• GLOBAL STRATEGY
• COSTS REDUCE LOCAL RESPOND HIGH-LOW
• TRANSNATIONAL STRATEGY
• COSTS REDUCE LOCAL RESPOND HIGH-HIGH

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OVER TIME

• INTERNATIONAL MULTIDOMESTIC/ LOCALIZATION
  STRATEGIES LESS VIABLE
• AS ARE STAND-ALONE, SINGLE-FIRM STRATEGIES
• ALTERNATIVES COOPERATE ACROSS FIRM BOUNDARIES
• BUSINESS GROUPS
• INDUSTRIAL DISTRICTS
• SMALL COOPERATIVE ARRANGEMENTS
• LARGE COOPERATIVE ARRANGEMENTS

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BASIC ENTRY DECISIONS

• WHICH PRODUCTS
• WHICH MARKETS
• TIMING OF ENTRY
• SCALE OF ENTRY
• MODE OF ENTRY
• EXPORT
• LICENSE
• FRANCHISE (specialized form of licensing)
• JOINT VENTURE
• STRATEGIC ALLIANCE
• WHOLLY OWNED SUBSIDIARY

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ADVANTAGES/DISADVANTAGES OF DIFF. ENTRY MODEES

• ADVANTAGES
• LOCATION ECONOMIES
• LOWER DEVELOPMENT/MFG COSTS
• SHARE COSTS RISKS
• GET CLOSER TO CUSTOMERS
• PROTECT TECH/IP/DISTINCTIVE COMP.
• DISADVANTAGES
• COSTS (COORDINATION, TRANSACTION)
• LACK OF CONTROL
• COMPLEXITY
• EXPROPRIATION/APPROPRIATION

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HOW FIRMS GO ABROAD

• OVERSEAS AGENTS
• SALES OFFICE
• SALES OTHER FUNCTION OFFICES
• TRADITIONALLY PROD, DISTRIB MKTING
• TODAY RD AND ENGINEERING
• INTERNATIONAL DIVISION
• INTERNATIONAL SUBSIDIARY
• NODE VS. MATRIX CELL OF GLOBAL FIRM

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MAKING STRATEGIC ALLIANCES WORK

• AGAIN, FROM STAND-ALONE FIRM PT OF VIEW
• WALL OFF CRITICAL TECHNOLOGY
• ESTABLISH CONTRACTUAL SAFEGUARDS
• AGREE TO SWAP VALUABLE SKILLS TECHNOLOGY (
  PEOPLE)
• SEEK CREDIBLE COMMITMENTS
• (DEVELOP RELATIONAL SKILLS CAPABILITIES FOR
  NETWORKS BUSINESS GROUPS)
• LEARNING AS OPPOSED TO COST/RISK SHARE

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MY OWN VIEWS

• HARD TO GO/BE GLOBAL WITH TRADITIONAL VIEW OF
  FIRM
• ALTERNATIVE ORGANIZATIONAL FORMS OFFER DIFF.
  STRATEGIES
• BUSINESS GROUPS
• INTERFIRM NETWORKS
• YOU CANT HAVE YOUR CAKE AND EAT IT TOO REAL
  LIMITS TO ORGANIZATION
• FIRMS CANT HANDLE TOO MUCH COMPLEXITY DONT
  TRAVEL WELL