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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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Presentation on theme: "Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education."— Presentation transcript:

1 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 10 Global Strategy: Competing Around the World

2 10-2

3 10-3 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? 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?

4 10-4 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 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

5 10-5 ChapterCase 10 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) 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) ©STR/AFP/Getty Images/Newscom

6 10-6 Exhibit 10.1 Lifetime Revenues of Hollywood Blockbuster Movies >$500 million (in $ million)

7 10-7  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 10.1 What Is Globalization?

8 10-8 Exhibit 10.2 Globalization 3.0: 21 st 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.

9 10-9 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 WHAT DEFINES A U.S. COMPANY?

10 10-10 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

11 10-11 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 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

12 10-12 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

13 10-13 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! 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!

14 10-14  A decision framework based on the relative distance. between home and a foreign target country  Along four dimensions: 1.Cultural distance 2.Administrative and political distance 3.Geographic distance 4.Economic distance Where in the World to Compete? The CAGE Distance Framework

15 10-15  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) HOFSTEDE AND CULTURAL DIMENSIONS

16 10-16 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 How Do MNEs Enter Foreign Markets?

17 10-17  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 10.4 Cost Reductions vs. Local Responsiveness: The Integration-Responsiveness Framework

18 10-18 Exhibit 10.6 Dynamic Strategic Positioning: The MTV Music Channel

19 10-19  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 10.5 National Competitive Advantage: World Leadership in Specific Industries

20 10-20  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 world- class competitors in downstream industry. Porter’s Diamond Framework

21 10-21 Exhibit 10.8 Porter’s Diamond of National Competitive Advantage

22 10-22 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

23 10-23 ChapterCase 10 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? 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? ©STR/AFP/Getty Images/Newscom

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