Global Strategy

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• Global Strategy

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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

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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

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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
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Pressures for Global Integration Local
Responsiveness
High
Ball bearings, wheat
Cost Reduction (Global Integration) Pressures
Cosmetics, food, household goods
Low
Low
High
Local Responsiveness Pressures
Differences in - consumer tastes/preferences -
infrastructure/practices - distribution
channels - host government needs/requirements
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Strategic Choice
Transnational Strategy
High
Global Strategy
Cost Reduction (Global Integration) Pressures
Multidomestic Strategy
International Strategy
Low
Low
High
Local Responsiveness Pressures
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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 Multidomes
tic Mentality - Management sees overseas
operations as portfolio of independent
businesses
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International MNC
HK
UK
Chile
USA
India
Japan
Mexico
Coordinated Federation - Key assets,
responsibilities decisions localized Administrativ
e Control - Centralized HQ control, formal
planning and control, tight HQ-Sub
linkage International Mentality - Management sees
overseas operations as appendages to a
domestic operation
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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
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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
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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

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Making alliances work which partner?

• A suitable partner
• Helps achieve strategic goals
• Adds needed, valuable capabilities
• Shares the firms vision for purpose of the
  alliance
• Is not likely to exploit the alliance to its own
  ends
• 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

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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

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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