STRATEGY IN THE GLOBAL ENVIRONMENT

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STRATEGY IN THE GLOBAL ENVIRONMENT

• BUS 189
• Fall 2009
• DR. MARK FRUIN

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LANGUAGE OF GLOBALIZATION

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

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WESTERN ORIENTATION

• LANGUAGE OF GLOBALIZATION (INTERNATIONAL
  BUSINESS) IS BASED ON A WESTERN POINT OF VIEW
• HBS MULTINATIONAL RESEARCH PROJECT BEGINS IN 50S
• YARDSTICK IS LARGE, AM FIRMS THAT WERE DOMINANT
  AT THE TIME WHEN
• EUROPE ASIA DEVASTATED
• INTERNATIONAL MEANS FOREIGN/FAR AWAY FROM A
  WESTERN OR AMERICAN POINT OF VIEW

4
NEW POINT OF VIEW

• THOMAS FRIEDMANS, LEXUS AND THE OLIVE TREE, THE
  WORLD IS FLAT, FLAT, HOT ?
• SUGGESTS THAT
• BOTH THE NUMERATOR DENOMINATOR OF THE
  INTERNATIONAL EQUATION SHOULD BE RECONSIDERED
• NUMERATOR, ABOVE THE LINE, IS NO LONGER LARGE,
  AMERICAN OR WESTERN FIRMS
• THAT IS, AMERICAN FIRMS ARE NO LONGER THE
  STANDARD BY WHICH NON-AMERICAN FIRMS SHOULD BE
  JUDGED
• DENOMINATOR, BELOW THE LINE, IS NO LONGER WESTERN
  ECONOMIES
• THREE OUT OF FIVE LARGEST ECONOMIES IN WORLD IN
  ASIA
• SIX OUT OF TEN MOST POPULOUS COUNTRIES IN ASIA,
  REPRESENTING 50 OF THE WORLDS POPULATION
• THE WORLD HAS CHANGED A LOT

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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 BENEFIT TO DEVELOPING THAN
  DEVELOPED COUNTRIES
• THE WORLD IS NOT REALLY FLAT, BUT SPIKEY
• HARD TO KNOW WHAT BIG MULTINATIONALS ARE ACTUALLY
  DOING HOW THEY BENEFIT THE WORLD ECONOMY

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WHY FIRMS GO ABROAD

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

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4 BASIC STRATEGIES, p. 271

• BASED ON WESTERN ORIENTED RESEARCH
• NOT NECESSARILY WRONG, BUT NOT NECESSARILY
  UP-TO-DATE
• A 2 X 2 WITH COST REDUCTIONS LOCAL
  RESPONSIVENESS AS THE AXES
• INTERNATIONAL STRATEGY
• COST REDUCE LOCAL RESPOND LOW-LOW
• MULTIDOMESTIC STRATEGY
• COST REDUCE LOCAL RESPOND LOW-HIGH
• GLOBAL STRATEGY
• COST REDUCE LOCAL RESPOND HIGH-LOW
• TRANSNATIONAL STRATEGY
• COST REDUCE LOCAL RESPOND HIGH-HIGH

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BASIC ENTRY DECISIONS

• WHICH PRODUCTS GOING TO
• WHICH MARKETS
• TARGETING WHAT GROUPS OF CONSUMERS
• TIMING OF ENTRY WHEN
• SCALE OF ENTRY HOW BIG
• MODE OF ENTRY HOW STRUCTURE
• EXPORT
• LICENSE
• FRANCHISE (specialized form of licensing)
• JOINT VENTURE
• STRATEGIC ALLIANCE
• WHOLLY OWNED SUBSIDIARY

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ADVANTAGES/DISADVANTAGES OF DIFFERENT ENTRY MODES

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

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HOW FIRMS GO ABROAD

• GENERALLY SUCCESSIVE MODES OF ENTRY
• OVERSEAS AGENTS LOCAL REPRESENTATIVES
• OUR OWN SALES OFFICE
• SALES OTHER ADDITIONAL FUNCTIONS OFFICE
• 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

• INCREASINGLY COMMMON WAY OF WORKING OVERSEAS
  PARTNER UP
• WALL OFF CRITICAL TECHNOLOGY
• ESTABLISH CONTRACTUAL SAFEGUARDS
• AGREE TO SWAP VALUABLE SKILLS TECHNOLOGY (
  PEOPLE)
• SEEK CREDIBLE COMMITMENTS
• DEVELOP RELATIONAL SKILLS CAPABILITIES
  (ESPECIALLY WHEN PARTNERING WITH INTER- FIRM
  NETWORKS BUSINESS GROUPS)
• LEARNING AS OPPOSED TO COST/RISK SHARING AS A
  PRIMARY OBJECTIVE

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MY OWN VIEWS

• HARD TO GO/BE GLOBAL WITH TRADITIONAL VIEW OF
  FIRM
• LIMITS TO ORGANIZATION, KENNETH ARROW, NOBEL
  PRIZE WINNING ECONOMISTS
• LIMITS TO HOW MUCH COMPLEXITY HIERARCHIES (FIRMS)
  CAN HANDLE
• ALTERNATIVE ORGANIZATIONAL FORMS OFFER
  DIFFERENT STRATEGIES THAN PROFIT MAXIMIZING
• BUSINESS GROUPS
• INTERFIRM NETWORKS
• YOU CANT HAVE YOUR CAKE AND EAT IT TOO
• MEANING YOU CANT EXPECT TO COVER THE WORLD ON
  THE BASIS OF HOME GROWN CAPABILITIES
• GIVE AND TAKE REQUIRED

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GOING FORWARD

• MORE AND MORE OF THE WORLDS LARGEST FIRMS
• MORE AND MORE OF THE WORLDS LARGEST AND MOST
  RAPIDLY GROWING ECONOMIES
• ARE GOING TO BE OUTSIDE THE COMFORT ZONE OF
  AMERICAN FIRMS
• HOW AMERICAN FIRMS ADAPT WILL BE KEY
• TWO CHOICES
• GO IT ALONE RISK LOSING IT ALL
• HOOKING UP GETTING SLICES OF EVER EXPANDING
  PIES
• SOMETHING IN BETWEEN, BUT THIS MAY BE THE MOST
  RISKY STRATEGY OF ALL