1. Global Strategies and the Multinational Corporation
©2015 Robert M. Grant & Judith Jordan

2. Learning Objectives
By the time you have completed this topic you will be able to:
be aware of the impact of internationalization on industry structure and competition
be able to analyze the implications of a firm’s national environment for its competitive advantage
be able to formulate strategies for exploiting overseas business opportunities, including overseas market entry strategies and overseas production strategies
appreciate how international strategies can be shaped to achieve an optimal balance between global integration and national differentiation
Be able to design organizational structures and management systems appropriate to the pursuit of international strategies
©2015 Robert M. Grant & Judith Jordan

3. Patterns of Internalization
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4. Competitive Advantage in an International Context
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5. National Influences on Competitiveness: The Theory of Comparative Advantage
A country has a relative efficiency advantage in those products that make intensive use of resources that are abundant within that country
The Philippines is relatively more efficient in the production of footwear, apparel, and assembled electronic products than in the production of chemicals and automobiles
The U.S. is relatively more efficient in the production of semiconductors and pharmaceuticals than shoes or shirts
When exchange rates are well-behaved, comparative advantage translates into competitive advantage
©2015 Robert M. Grant & Judith Jordan

6. Porter’s National Diamond Framework
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7. Applying the Framework: International Location of Production
Three major factors:
National resource conditions: What are the major resources which the product requires? Where are these available at low cost?
Firm-specific advantages: To what extent is the company’s competitive advantage based upon firm- specific resources and capabilities, and are these transferable?
Tradability issues: Can the product be transported at economic cost? If not, or if trade restrictions exist, then production must be close to the market.
©2015 Robert M. Grant & Judith Jordan

8. Determining the Optimal Location of Value Chain Activities
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9. Alternative Modes of Overseas Market Entry
©2015 Robert M. Grant & Judith Jordan

10. Choosing the Modes of Overseas Market Entry: Key Strategic Questions
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 needed to establish a competitive advantage in the overseas market?
Can the firm directly appropriate the returns to its resources?
What transaction costs are involved?
©2015 Robert M. Grant & Judith Jordan

11. International Alliances and Joint Ventures
Strategic alliances are collaborative arrangements between firms
International alliances are strategic alliances involving partners from different countries
International joint ventures are where partners from different countries form a new, jointly-owned company
The main motivation for international alliances and joint ventures is the desire by multinational companies to access the market knowledge and distribution capabilities of local companies and the desire of the local partner to access the technology, brands and product development of the multinational.
©2015 Robert M. Grant & Judith Jordan

12. The Benefits of Global Strategy
Cost benefits of scale and replication
Accessing global scale economies in purchasing, manufacturing, product development, marketing
Replicating knowledge
Serving global customers
Multinational companies may prefer suppliers that can serve their global needs multiple locations
Arbitrage benefits
The international firm can access better or cheaper natural, human, and technological resources
©2015 Robert M. Grant & Judith Jordan

13. The Benefits of Global Strategy
Learning benefits
Assessing and integrating knowledge from multiple locations
Competing strategically
Exploiting global strength to win local wars
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14. The Benefits of Global Strategy
©2015 Robert M. Grant & Judith Jordan

15. The Benefits of Global Integration Versus National Differentiation
©2015 Robert M. Grant & Judith Jordan

16. The Development of the Multinational Corporation: Alternative Parent-Subsidiaries Relations
Note: The density of shading indicates the concentration of decision making
©2015 Robert M. Grant & Judith Jordan

17. The Transnational Corporation
©2015 Robert M. Grant & Judith Jordan