To what extent should firms have one global strategy vs To what extent should firms have one global strategy vs. various and multiple domestic strategies?

Multinational Strategies: Globalization versus National differentiation The case for a global strategy: National preferences in decline-- possible to view the world becoming a single, if segmented, market. Access to global scale economies--cost savings in purchasing, manufacturing, product development and marketing. Strategic strength from global positioning-- but locating in multiple national markets, by locating in multiple national markets, the global competitor can cross-subsidize to attack nationally focused rivals. Need to access market trends and technological developments in each of the world’s major economic centers- N. America, Europe, EastAsia. } Ted Levitt “Global- -ization Thesis” Hamel & Prahalad Thesis Kenichi Ohmae’s “Triad Power” Thesis 20

Matching Global Strategies and Structures to Industry Conditions Degree of globalization depends upon the benefits of global integration versus the benefits of national differentiation. Key issue: --How important are global scale economies? --How different are customer requirements between countries? Jet engines Benefits of global integration Consumer electronics Telecommunications equipment Packaged grocery products Cement Benefits of national differentiation 24

Marketing Global Strategies and Situations to Industry Conditions: Firm Success in Different Industries Consumer Electronics Branded, Packaged Telecommunications Consumer Goods Equipment - Global industry - Substantial national - Requires both global - Matsushita the most differentiation, few global integration and national successful scale economies differentiation. - Philips the survivor - Kao has limited success - NEC only partially - GE sold out outside Japan successful - Unilever and P&G most - ITT sold out successful - Ericsson most successful Matsushita NEC Kao Erickson global integration Philips global integration P&G global integration Unilever General Electric ITT local responsiveness local responsiveness local responsiveness 25

How should firms organize to achieve global excellence? (centralized vs. decentralized)

Strategy and Organization of the MNC: The Evolution of Multinational Strategies and Structures : (1) Pre 2nd WW: Era of the Europeans The European MNC as Decentralized Federation : National subsidiaries self-sufficient and autonomous Parent control through appointment of subsidiaries senior management Organization and management systems reflect conditions of transport and communications at the time e.g. Unilever, Phillips, Courtaulds, Royal Dutch/Shell. 21

Strategy and Organization of the MNC: The Evolution of Multinational Strategies and Structures: (2) Post 2nd WW: U.S. Dominance American MNC’s as Coordinated Federations : National subsidiaries fairly autonomous Dominant role as U.S. parent-- especially in developing new technology and products Parent-subsidiary relations involved flows of technology and finance, and appointment of top management.e.g. Ford, GM, Coca Cola, IBM 22

Strategy and Organization of the MNC: The Evolution of Multinational Strategies and Structures: (3) 1970’s and 1980’s: The Japanese Challenge The Japanese MNC as Centralized Hub Pursuit of global strategy from home base Strategy, technology development, and manufacture concentrated at home National subsidiaries primarily sales and distribution companies with limited autonomy. e.g. Toyota, NEC, Matsushita 23

Reconciling Global Integration with National Differentiation: The Transnational Corporation Tight complex controls and coordination and a shared strategic decision process. Heavy flows of technology, finances, people, and materials between interdependent units. The Transnational: an integrated network of distributed interdependent resources and capabilities. Each national unit and source of ideas, skills and capabilities that can be harnessed to benefit whole corporation. National units become world sources for particular products, components, and activities. Corporate center involved in orchestrating collaboration through creating the right organizational context. 26

Where should firms locate various activities? (e.g. manufacturing)

International Location of Industrial Activities within the Value Chain Where is the optimal location of X in terms of the cost and availability of inputs? The optimal location of activity X considered independently What government incentives/ penalties affect the location decision? What internal resources and capabilities does the firm possess in particular locations? WHERE TO LOCATE ACTIVITY X? What is the firm’s business strategy (e.g. cost vs. differentiation advantage)? The importance of links between activity X and other activities of the firm How great are the benefits of linkages through proximity? 15

Why do some countries excel at some industries. (e. g Why do some countries excel at some industries? (e.g. Japan photography; Italy: fashion)

Porter’s National Diamond Framework 1. FACTOR CONDITIONS. “Home grown” resources and capabilities more important than natural endowments. 2. RELATED AND SUPPORTING INDUSTRIES. Competitive advantage occurs in “industry clusters” (e.g. semiconductors-computers-software in the U.S.). 3. DEMAND CONDITIONS. Discerning domestic customers drive quality and innovation (e.g. Japanese camera industry) 4. STRATEGY, STRUCTURE, RIVALRY. E.g. domestic rivalry drives innovation and upgrading. FACTOR CONDITIONS RELATING AND SUPPORTING INDUSTRIES DEMAND CONDITIONS STRATEGY, STRUCTURE, AND RIVALRY 10