Global Strategies and the MNC Shea Gordon Kyle Harris Bradley Peters Matthew Powers

IKEA’s International Strategy A brief company history Pattern of Internationalization Challenges of Internationalization Tastes changes from culture to culture Adaptation was necessary Recent struggles moving to China

Patterns of Internationalization Sheltered Industries Trading Industries Multidomestic Industries Global Industries

Analyzing Competitive Advantage in an International Context National Influences on Competitiveness Comparative Advantage Firm Resources and Capabilities The Industry Environment The National Environment

Porter’s National Diamond Factor Conditions Demand Conditions Related and Supporting Industries Establishing competitive advantage in global industries requires congruence between business strategy and the pattern of the country’s comparative advantage. Limitation of diamond model: Model fails to take into consideration the attributes of the home country’s largest trading partners, isn't applicable to most of the world's smallest nations, and ignores the role of multinational corporations in influencing the competitive success of nations. The diamond value is so general, it lacks real value. Trying to explain all aspects of trade and competition the model ends up explaining nothing because it is insufficiently precise to generate testable predictions Strategy, Structure, and Rivalry

Intel Diamond Model Easy and cheap materials Well-educated work force Factor Conditions Easy and cheap materials Well-educated work force Related and Supporting Industries Demand Conditions Slowing growth in PC market “evolving market trends” Difficult to imitate product Slowing PC growth Must look to foreign countries for supplies. Growing competition for superconductors Little rivalry for microprocessors Move to open mobile platforms Strategy, Structure, and Rivalry

Applying the Framework: International Location of Production National resource availability Firm-specific competitive advantage Tradability Political Considerations NRA: where key resources differ in their availability or cost, firms should manufacture where resource supplies are favorable CA: optimal location depends on where those resources and capabilities are situated and how mobile they are Trade: the more difficult it is to transport, the more production will need to take place within the local market PC: government incentives. Penalties and restrictions affect location decisions

Location and Value Chain Seek countries whose resource availability and cost best match each stage of the value chain Cost factors: Availability of resources Quality of resources and capabilities

Entering Foreign Markets

Entering Foreign Markets: Cont. International Business class International alliances and joint ventures: Strategic alliances: collaborative arrangements between firms by sharing resources and capabilities between partners, alliances not only economize on investment, they also allow access to more highly developed resources and capabilities than a firm can create for itself.

Five Key Factors for Market Entry Is the firm’s competitive advantage based on firm specific or country specific resources? Is the product tradable and what are the barriers to trade? Does the firm possess the full range of resources and capabilities for establishing a competitive advantage in the overseas market? Can the firm directly appropriate the returns to its resources? What transaction costs are involved?

Multinational Strategies Global Integration Vs. National Differentiation Global Wins for 2 Reasons Economies of Scale Local customer preferences are disappearing

5 Benefits of Global Strategy Cost Benefits of Scale and Replication Serving Global Customers Exploiting National Resources Learning benefits Competing Strategically

Need For National Differentiation National Differences in Customer Preferences continue to exert a powerful influence in most markets

Global Game with National Differentiation New Skins in new Regions Global Competitive Scene

Reconfiguring the MNC: the Transnational Corporation Changing Organization Structure: national to worldwide New Approaches to reconciling localization and global integration. Necessities for this: Each unit is a source of ideas, skills, capabilities National units become source for particular product The center has a highly complex managing role

Reconfiguring the MNC cont. Transnational firm is a concept rather than archetype MNC’s are increasingly locating management outside home Nexans head of shipbuilding cables moves to South Korea Biggest challenge of MNC’s: integrating innovation globally

Summary Moving internationally increases complexity Companies can enter markets globally by exporting, licensing, or directly investing National differences pressures companies to adapt Global integration requires companies to become transnational