STRATEGY IN THE GLOBAL ENVIRONMENT BUS 189 SPRING 2007 DR. MARK FRUIN

LANGUAGE OF GLOBALIZATION NATIONAL FIRM INTERNATIONAL FIRM MULTINATIONAL FIRM TRANSNATIONAL FIRM METANATIONAL FIRM GLOBAL FIRM

WESTERN ORIENTATION LANGUAGE OF GLOBALIZATION (INTERNATIONAL BUSINESS) IS BASED ON A WESTERN POINT OF VIEW; INTERNATIONAL MEANS NON-U.S. HBS MULTINATIONAL RESEARCH PROJECT BEGINS IN ‘50S YARDSTICK OF INTERNATIONAL IS LARGE, AMERICAN FIRMS THAT WERE DOMINANT AT THE TIME WHEN EUROPE & ASIA DEVASTATED

NEW POINT OF VIEW THOMAS FRIEDMAN’S, LEXUS & THE OLIVE TREE & THE WORLD IS FLAT SUGGESTS THAT –BOTH THE NUMERATOR AND DENOMINATOR NEED TO BE RECONSIDERED –NUMERATOR, ABOVE THE LINE, IS NO LONGER LARGE, AMERICAN OR EVEN WESTERN FIRMS –DENOMINATOR, BELOW THE LINE, IS NO LONGER WESTERN ECONOMIES WHAT OTHER ECONOMIES? OF THE TEN LARGEST ECONOMIES IN WORLD, BASED ON PPP, HOW MANY ARE IN WEST?

ALTHO THERE ARE PROBLEMS FRIEDMAN TALKS A LOT ABOUT INFORMATION EQUALITY (INTERNET) AND MARKET ACCESS NEW RELATIONSHIPS BETWEEN INDIV & INDIV, INDIV & STATE, STATES & STATES BUT FREE TRADE LESS BENEFICIAL TO DEVELOPING THAN DEVELOPED COUNTRIES THE WORLD IS NOT FLAT, BUT SPIKEY HARD TO KNOW WHAT BIG MULTINATIONALS ARE DOING & HOW THEY BENEFIT

GLOBALIZATION’S CONSEQUENCES INDUSTRY BOUNDARIES/COMPETITION ARE NO LONGER NATIONAL INTENSIFICATION OF RIVALRY IN MOST INDUSTRIES INCREASED THREAT OF ENTRY FROM OVERSEAS FIRMS NEW WORLDWIDE OPPORTUNITIES, BUT TAKING ADVANTAGE OF THEM NOT EASY

WHY FIRMS GO ABROAD LOCATION ECONOMIES TO ACCESS MARKETS & TAKE ADVANTAGE OF FACTOR INPUTS TAKE ADVANTAGE OF SUBSIDIARY CAPABILITIES & COMPETENCIES TO BE MORE LOCALLY RESPONSIVE TO TAKE ADVANTAGE OF MARKET-LEADING CAPABILITIES –PRODUCT LIFE-CYCLE MODEL –FIRST-MOVER & FAST-TO-MARKET

4 BASIC STRATEGIES, p. 276, 281 BASED ON WESTERN ORIENTED RESEARCH; BECAUSE MODEL IS STAND-ALONE FIRM INTERNATIONAL STRATEGY –COSTS REDUCE & LOCAL RESPOND: LOW-LOW MULTIDOMESTIC/LOCALIZATION STRATEGY –COSTS REDUCE & LOCAL RESPOND: LOW-HIGH GLOBAL STRATEGY –COSTS REDUCE & LOCAL RESPOND: HIGH-LOW TRANSNATIONAL STRATEGY –COSTS REDUCE & LOCAL RESPOND: HIGH-HIGH

OVER TIME INTERNATIONAL & MULTIDOMESTIC/ LOCALIZATION STRATEGIES LESS VIABLE AS ARE STAND-ALONE, SINGLE-FIRM STRATEGIES ALTERNATIVES: COOPERATE ACROSS FIRM BOUNDARIES –BUSINESS GROUPS –INDUSTRIAL DISTRICTS –SMALL COOPERATIVE ARRANGEMENTS –LARGE COOPERATIVE ARRANGEMENTS

BASIC ENTRY DECISIONS WHICH PRODUCTS WHICH MARKETS TIMING OF ENTRY SCALE OF ENTRY MODE OF ENTRY –EXPORT –LICENSE –FRANCHISE (specialized form of licensing) –JOINT VENTURE –STRATEGIC ALLIANCE –WHOLLY OWNED SUBSIDIARY

ADVANTAGES/DISADVANTAGES OF DIFF. ENTRY MODEES ADVANTAGES –LOCATION ECONOMIES –LOWER DEVELOPMENT/MFG COSTS –SHARE COSTS & RISKS –GET CLOSER TO CUSTOMERS –PROTECT TECH/IP/DISTINCTIVE COMP. DISADVANTAGES –COSTS (COORDINATION, TRANSACTION) –LACK OF CONTROL –COMPLEXITY –EXPROPRIATION/APPROPRIATION

HOW FIRMS GO ABROAD OVERSEAS AGENTS SALES OFFICE SALES & OTHER FUNCTION OFFICES –TRADITIONALLY PROD, DISTRIB & MKTING –TODAY R&D AND ENGINEERING INTERNATIONAL DIVISION INTERNATIONAL SUBSIDIARY NODE VS. MATRIX CELL OF GLOBAL FIRM

MAKING STRATEGIC ALLIANCES WORK AGAIN, FROM STAND-ALONE FIRM PT OF VIEW “WALL OFF” CRITICAL TECHNOLOGY ESTABLISH CONTRACTUAL SAFEGUARDS AGREE TO SWAP VALUABLE SKILLS & TECHNOLOGY (& PEOPLE) SEEK CREDIBLE COMMITMENTS (DEVELOP RELATIONAL SKILLS & CAPABILITIES FOR NETWORKS & BUSINESS GROUPS) LEARNING AS OPPOSED TO COST/RISK SHARE

MY OWN VIEWS HARD TO GO/BE GLOBAL WITH TRADITIONAL VIEW OF FIRM “ALTERNATIVE” ORGANIZATIONAL FORMS OFFER DIFF. STRATEGIES –BUSINESS GROUPS –INTERFIRM NETWORKS YOU CAN’T HAVE YOUR CAKE AND EAT IT TOO; REAL LIMITS TO ORGANIZATION FIRMS CAN’T HANDLE TOO MUCH COMPLEXITY; DON’T TRAVEL WELL