1. Group 1 Ethan Brown Erin Hillman Laura Moreno Garrett Sticklen GLOBAL STRATEGIES AND THE MULTINATIONAL CORPORATION

2. PATTERNS OF INTERNATIONALIZATION  Internationalization occurs through trade and direct investment.  Trade – the sale and shipment of goods and services from one country to another  Direct Investment – building or acquiring productive assets in another country

3. IDENTIFY DIFFERENT TYPES OF INDUSTRIES  Sheltered Industries  Served exclusively by indigenous firms  Sheltered from both imports and inward direct investment by regulation, trade barriers, or because of the localized nature of the goods and services they offer.  Primarily fragmented service industries, some small-scale manufacturing, and industries producing products that are non-tradeable because they are perishable or difficult to move.  Trading Industries  imports and exports  If a product is transportable, not nationally differentiated and subject to substantial scale economies, exporting from a single location is the most efficient means to exploit overseas markets.  Products whose inputs are available only in a few locations

4. IDENTIFY DIFFERENT TYPES OF INDUSTRIES  Multi-domestic Industries  direct investment  This is because either:  Trade is not feasible  Products are nationally differentiated.  Global Industries  Trade and Direct Investment are important  Most large-scale manufacturing industries

5. PATTERNS OF INDUSTRY INTERNATIONALIZATION Trading Industries Aerospace Military hardware Diamond mining Agriculture Global Industries Cars Oil Semiconductors Consumer Electronics Sheltered Industries Railroads Laundries/ Dry cleaning Hairdressing Milk Multidomestic Industries Packaged Groceries Investment Banking Hotels Consulting Low Trade High Low Direct Investment High

6. ANALYZING COMPETITIVE ADVANTAGE IN AN INTERNATIONAL CONTEXT  Competitive Advantage (Domestic)  Achieved when a firm matches its internal strengths in resources and capabilities to the key success factors of the industry.  Competitive Advantage (Global)  In international industries, competitive advantage also depends on its national environment.  In particular, the availability of resources within the countries where it conducts business.

7. COMPARATIVE ADVANTAGE  “A country has a comparative advantage in products that make intensive use of those resources available in abundance within that country” (372).  U.S. holds a comparative advantage over Mexico in technology intensive products.  Computers, pharmaceuticals, etc.

8. COMPARATIVE  COMPETITIVE ADVANTAGE  Comparative advantage can lead into competitive advantage if it is exploited properly.  What does my company do better in and how can we build off it to gain a competitive advantage?

9. DETERMINING HOW BIG THE COMPARATIVE ADVANTAGE IS  Depends on two factors:  The resources needed to commercialize knowledge  Capital markets, legal systems, communication resources  The central role of knowledge  Technology, management capabilities, human skills

10. PORTER’S NATIONAL DIAMOND  Identifies four key factors that determine a country’s competitive advantage within a particular sector. Factor Conditions Demand Conditions Strategy, Structure, and Rivalry Related and Supporting Industries

11. PORTER’S NATIONAL DIAMOND  Factor Conditions  Today, comparative advantage focuses on the role of highly specialized resources, many of which are home-grown rather than endowed.  Related and Supporting Industries  National competitive strengths tend to be associated with clusters of industries  For each industry, closely related industries are great sources of critical resources and capabilities.

12. PORTER’S NATIONAL DIAMOND  Demand Conditions  “Demand conditions in domestic markets are the primary driver of innovation and quality improvement” (374).  Strategy, Structure and Rivalry  Domestic competitive performance is typically related to the strategies and structures of firms in the industry.  Porter emphasizes the role of intense domestic competition in driving innovation, efficiency, and the increasing of competitive advantage.

13. CONSISTENCY BETWEEN STRATEGY AND NATIONAL CONDITIONS  To have a global competitive advantage requires harmony between business strategy and the pattern of the country’s comparative advantage.  U.S. audio equipment companies, such as Bose, focus on basic research for their products.  Chinese audio equipment companies, focus more on producing for western brands, at cheaper costs.

14. LIMITATION OF THE DIAMOND MODEL  Criticism of the diamond model comes from primarily two different perspectives.  Perspective 1  Model is lacking key factors.  It isn’t applicable to most of the world’s smaller nations and ignores the role of multinational corporations in influencing success of nations.  Perspective 2  Model is so general that it lacks value.  By trying to explain all aspects of trade and competition, the model ends up explaining nothing because it is insufficiently precise to generate testable predictions.

15. INTERNATIONAL LOCATION  Resource Availability  Competitive Advantage  Tradability  Political

16. ENTERING THE FOREIGN MARKET  Competitive advantage  Tradeable  Range of resources  Revenue direction  Transaction costs

17. STRATEGIC ALLIANCE

18. MULTINATIONAL STRATEGIES: GLOBAL INTEGRATION VS. NATIONAL DIFFERENTIATION  International scope may itself be a source of competitive advantage over geographically focused competitors  Whether, and under what conditions, firms that operate on an international basis are able to gain a competitive advantage over nationally focused firms.

19. BENEFITS OF A GLOBAL INDUSTRY  Supplying the world market allows access to scale economies in product development, manufacturing, and marketing. “Everywhere everything gets more and more like everything else as the world’s preference structure is relentlessly homogenized.” -Levitt  The key barriers to exploiting these scale economies, locally differentiated customer preferences, are fast disappearing in the face of uniformity imposed by technology, communication, and travel.

20. THE BENEFITS OF A GLOBAL STRATEGY  Cost Benefits of Scale and Replication  Must operate on a global scale to spread their huge investments in developing new products  Replication of knowledge-based assets- including organizational capabilities  Serving Global Customers  Exploiting National Resources – Arbitrage Benefits  Be aware of not only market opportunities, but also resource opportunities  Learning Benefits  You need to not only access and transfer localized knowledge but also integrate the knowledge you gain from different locations and create new knowledge through interacting with different national environments.  Competing Strategically  Cost-subsidization  predatory pricing

21. THE NEED FOR NATIONAL DIFFERENTIATION  Products designed to meet the needs of the “global customer” tend to be unappealing to most customers. Cultural Distance Administrative and Political Distance Geographical Distance Economic Differences Distance between two countries increases with: Different languages, Ethnicities, Religions, Social Norms Lack of Connective ethnic or social network Absence of shared political or monetary association Political Hostility Weak legal financial institutions Lack of Common Border, Water Way Access, Adequate Transportation or communicatio n links Physical Remoteness Different consumer incomes Different costs and quality of natural, financial, and human resources Different information or knowledge

22. RECONCILING GLOBAL INTEGRATION WITH NATIONAL DIFFERENTIATION  Reconciling global efficiency with appealing to customer preferences in each country also means looking at the globalization/national differentiation trade-off for individual products and individual function.

23.  One of the greatest challenges facing the senior managers of multinational corporations is the aligning organizational structures and management systems and their fit with the strategies being pursued. STRATEGY AND ORGANIZATION WITHIN THE MULTINATIONAL CORPORATION

24.  During different periods international firms have adopted different strategies and different structural configurations.  Multinational corporations are captives of their history: their strategy-structure configurations today reflect choices they made at the time of their international expansion.  Radical changes in strategy and structure are difficult: once an international distribution of functions, operations and decision-making authority has been determined, reorganization is slow, difficult and costly.  Bartlett and Ghoshal identify three eras in the development of the multinational corporations. THE EVOLUTION OF MULTINATIONAL STRATEGIES AND STRUCTURES

25. EARLY 20 TH CENTURY: THE EUROPEANS Decentralized Federations

26. POST-WORLD WAR II: THE AMERICANS Coordinated Federations

27. THE 1970S AND 1980S: THE JAPANESE Centralized Hubs

28.  Changing Organization Structure  New Approaches To Reconciling Localization And Global Integration  Organizing R&D And New Product Development RECONFIGURING THE MNC: THE TRANSNATIONAL CORPORATION

29.  The principal structural changes of recent decades have been a shift from organization around national subsidiaries and regional groupings to the creation of worldwide product divisions.  For most MNCs, country and regional organizations are retained, but primarily for the purposes of national compliance and customer relationships. CHANGING ORGANIZATION STRUCTURE

30.  Escalating costs of research and new product development have made global strategies with global product platforms essential.  At the same time, meeting consumer needs in each national market and responding swiftly to changing local circumstances requires greater decentralization.  And accelerating technological change further exacerbates these contradictory forces. NEW APPROACHES TO RECONCILING LOCALIZATION AND GLOBAL INTEGRATION

31.  The distinguishing characteristic of the transnational is that it becomes an integrated network of distributed and interdependent resources and capabilities.  This is a concept and direction rather than a distinct organizational archetype.  It involves convergence of the different strategy configurations of MNCs. TRANSNATIONAL ORGANIZATION

32.  The greatest challenges facing top managers of MNCs are organizing, fostering and exploiting innovation and new product development.  Innovation is stimulated by diversity and autonomy, while its exploitation and diffusion require critical mass and coordination. ORGANIZING R&D AND NEW PRODUCT DEVELOPMENT

33.  In an international environment, a firm’s potential for competitive advantage is determined not just by its own resources and capabilities but also by the conditions of the national environment in which it operates.  The fact that so many companies that have been outstandingly successful in their home market have failed so miserably in their overseas expansion demonstrates the complexity of international management. SUMMARY