Strategy A View From the Top Chapter 8 – Global Strategy Formulation Larin Sanders Ivan Salazar Brian Davis

Clustering – Globalization and Industrial Natural endowments – Australia, United States Relative advantage – Semiconductor industry Decentralized patterns – GE, Whirlpool

“National Diamond” Determinants of National Competitive Advantage Firm Strategy, structure, and rivalry Factor Endowments Related and Supporting Industries Demand Conditions Chance Government

Industry Globalization Drivers Industry Globalization Potential Market Drivers Evolution of customer needs Global customers Global channels Transferability of marketing Governmental Drivers Trade barriers Regulatory climate Technology/standards Economic Drivers Nature of industry Economies of scale/location Differences in country costs Competitive Drivers Interdependence between countries/regions Globalization of competitors

Global Strategy Formulation MultinationalInternationalGlobalTransnational Strategic Orientation Building flexibility to respond to national differences Exploiting parent company knowledge and capabilities Building cost advantages through global economies of scale Developing global efficiency while maintaining flexibility and the capacity to learn Assets and Capabilities Required Strong, resourceful and entrepreneurial national operations Effective mechanisms for diffusion and adaptation Size and the ability to manage standardization Strong culture of communication. Arm’s length mtg. control system. Configuration of assets and capabilities Decentralized and nationally self- sufficient Sources of competency centralized. Operations decentralized Centralized and globally scaled Interdependent, dispersed, specialized and controlled

Global Strategy Formulation 5 Dimensions (1)Market Participation (2)Standardization/ Positioning (3)Activity Concentration (4)Coordination of decision making (5) Nonmarket factors

Global Strategy Formulation Market Participation Few companies can afford to enter all markets open to them A global view of market opportunities requires a multidimensional perspective, in many industries we can distinguish between: Must Markets Vs. Nice-to-be in Markets Strategic Alliances have made vertical and horizontal integration less important Alliances boost contribution to fixed cost while expanding a company’s global reach

Global Strategy Formulation Standardization/Positioning As globalization advances, many companies seek to standardize core products and services However, the idea of a fully identical standardized global product is a myth…Ex. Sony Adopting a more global market positioning is another form of standardization Example of these are Coca Cola, Disney World, Unilever, and IBM

Global Strategy Formulation Global branding strategy matrix Global Mix- both the offer and the message are the same Global Offer-same offer but different positioning around the world Global Message- offer is different but the message is the same Global Change- both offer and message are adapted to local market circumstances StandardizedTailored StandardizedGlobal MixGlobal Offer TailoredGlobal MessageGlobal Change

Global Strategy Formulation Activity Concentration To enhance global competitiveness, companies continually look at 3 factors (1) which parts of the value-creation process they should do themselves and which to outsource (2)whether they can eliminate duplicate operations and reduce the number of manufacturing sites (3) whether they can relocate value-added activities to more cost effective locations Ex. Eli Lilly with R&D

Global Strategy Formulation Coordination of Decision Making The degree to which decision making is coordinated on a global scale defines the extent to which globalization has been implemented. Leveraging regional cost differentials Sharing key resources Cross-subsidizing national battles for market share Pursuing global brand and distribution positions

Global Strategy Formulation Nonmarket Dimensions Increasingly, success on a global level is influenced by nonmarket factors that are governed by (1) social, (2) political, and (3) legal arrangements. An effective global strategy addresses both elements; market dimensions and nonmarket dimensions

Global Strategy Formulation Region/Country Analysis Political and social systems Openness Product markets Labor markets Capital markets

Global Strategy Formulation How Wal-Mart Went Global Global Opportunity – Dedicated and committed workforce Target Markets – Americas vs. European and Asian markets Mode of Entry – Joint venture

Global Strategy Formulation How Wal-Mart Went Global….cont Global Transfer of Skills Local Adaptation – Regulations and government policies Local Competition – Acquiring a dominant player – Acquiring a weak player – Launching a frontal attack on the incumbent Gains and Setbacks

Global Strategy Formulation Global Strategy and Risk – Types of Risk Political Risk – Global and country-specific risk – Macro and Micro political risk Legal Risk – Foundations of a country’s legal system

Global Strategy Formulation Global Strategy and Risk….cont Financial/Economic Risk – Working conditions, infrastructure, technological innovation, economic development, etc. Societal /Cultural Risk Global Strategy – Exploiting similarities and differences