3 Key Issues What is the concept of strategy? How can firms profit from global expansion?What are the different strategies to compete globally?How do cost pressures and country differences influence global strategy?How can firms use strategic alliances to support their global strategy?
4 Slide 10-1Global StrategyStrategy: “the action managers take to attain the goals of a firm”General purpose: maximize/make profitDifferentiate products, increase price: add value, features, quality, serviceAchieve low costKey means: allocation of scarce resources to attain goals
5 Slide 10-2Activity Value ChainFirm as a chain of discrete value creating activitiesPrimaryupstream activities, manufacturingdownstream activities: marketing, sales, after sales serviceSupportinfrastructure (general and administrative)human resourcesresearch and development
6 Global Expansion Benefits Slide 10-3Global Expansion BenefitsEarn greater return from distinctive skills, core competencesinimitable or difficult to imitate skills in value chainRealize location economies (choice of FDI location)create multinational network of activities (global web)Realize greater experience curve economies, which reduce the cost of value creationlearning effects, economies of scaleUnit costsExperience curveBAAccumulated output
7 Pressures for Global Integration & Local Responsiveness Slide 10-4Pressures for Global Integration & Local ResponsivenessHighBall bearings,wheatGlobal IntegrationCost ReductionPressuresCosmetics, food,household goodsLowLowLocal Responsiveness PressuresHighCountry Differences in- consumer tastes/preferences- infrastructure/practices- distribution channels- host government needs
9 Multidomestic MNC HK UK Chile USA India Japan Mexico Slide 10-6Multidomestic MNCFrom: Bartlett and Ghoshal, Managing across borders, 1989HKUKChileUSAIndiaJapanMexicoDecentralized Federation - Many key assets, responsibilities and decisions localizedPersonal Control - Informal HQ-Sub relationship, simple financial controlsMultidomestic Mentality - Management sees overseas operations as portfolio of independent businesses
10 International MNC HK UK Chile USA India Japan Mexico Slide 10-7International MNCFrom: Bartlett and Ghoshal, Managing across borders, 1989HKUKChileUSAIndiaJapanMexicoCoordinated Federation - Many key assets, responsibilities and decisions localizedAdministrative Control - Centralized HQ control, formal planning and control, tight HQ-Sub linkageInternational Mentality - Management sees overseas operations as appendages to a domestic operation
11 Global MNC HK UK Chile USA India Japan Mexico Slide 10-8Global MNCFrom: Bartlett and Ghoshal, Managing across borders, 1989HKUKChileUSAIndiaJapanMexicoCentralized Hub - Most strategic assets, resources, responsibilities and decisions centralizedOperational Control - Tight HQ control of decisions, resources, informationGlobal Mentality - Management sees overseas operations asdelivery pipelines to a unified global market
12 Transnational MNC HK UK Chile USA Japan India Mexico Slide 10-9Transnational MNCFrom: Bartlett and Ghoshal, Managing across borders, 1989HKUKChileUSAJapanIndiaMexicoNetworked Organization - Distributed, specialized resources and capabilitiesInterdependent Units - large flows of components, products, resources, people, and informationTransnational Mentality - Complex process of coordination and cooperation in an environment of shared decision making
13 International Strategic Alliances Slide 10-10International Strategic AlliancesCooperative agreements among competitors from different countriesAdvantagesFacilitate entry into a foreign countryAllow sharing of fixed costs of new products/processesBring together complementary skills and assets that can not easily be developed independentlyHelp establish industry standards in technologyReduce operating costs,e.g., shared training, purchasingDisadvantagesGive competitors new technology / markets at low costDisproportional benefit accrual to partners
14 Making alliances work Which partner? Slide 10-11Making alliances work Which partner?A suitable partnerHelps achieve strategic goals; brings needed, valuable capabilitiesShares the firm’s vision for the alliance’s purposeIs not likely to exploit the alliance to its own endsTo select a partnerDo thorough background check from public sourcesCollect information from third parties who have personal experience with the likely partner(s)Spend a lot of face-to-face time with likely partner(s)
15 Making alliances work What Structure? Slide 10-12Making alliances work What Structure?Protect technology/know-how that is not intended to be transferredDraw a solid contract with safeguards against opportunismAchieve equitable gain through agreed swaps of technology the other wantsSeek creditable, clearly articulated commitment to partner “behavior” a-priori
16 Making alliances work How to manage? Slide 10-13Making alliances work How to manage?Show sensitivity to cultural differences that explain different managerial stylesBuild trustSet up framework for formal and informal face-to-face meetings to create the opportunity for a common value system to emergeBuild an informal network of personal relationshipsLearn from partnersApply the knowledge within your own organizationBrief your employees on partner strengths
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