Global Business #2May 14, 2011

Dept of Technology Management for Innovation (TMI), Graduate School of Engineering

Professor Kazuyuki Motohashi工学系研究科 技術経営戦略学専攻教授

元橋一之

http://www.mo.t.u-tokyo.ac.jp

Today’s class

• What is business strategy?• What is global business strategy（CAGE）

• AAA framework• Introduction to the case material “China or

India?”

Business Strategy

• Mid or long term direction of business to achieve sustainable economic returns (corporate value)– Strategy: military terms, back to Sun’s “The Art of

War”– MOST

• Mission: like “Sony is pioneer”, • Objective: More concrete goal of business, corporate• Strategy： Short description of how to achieve goals• Tactics： Business unit level activities (often not documented)

• know your enemy, know thyself, and you shall not fear a hundred battles– External competition and internal competitiveness – 3C of corporate management ：Competitor, Customer,

Company

Business Strategy Analysis: SWOT

Positioning School (by M. Porter): External competition focusRBV(Resource Based View) School: Internal competitiveness focus

V(Value), R(Rarity), I(Imitability), O(Organization)

China: Factory or Market?

Why global strategy is different?(CAGE)

• Cultural Distance: language, customs, religion, cultures etc.

• Administrative Distance: regional integration administration (FTAs), currency, common suzerain state, political dispute

• Geographic Distance： physical distance, time zone,• Economic Distance： per capital GDP, wages, living

costs

Value Creation by combining Adaptation, Aggregation, Arbitrage

India vs China from US viewpoint

Ghemawat(2007)

AAA: How to manage “distance”?

Adaptation：Customization of product or services to local market: McDonald’s vegi-burger in India, soundless and compact fridge in China (by Panasonic)…

Aggregation：Globally (or regionally) standardized product and services: Toyota’s pickup tracks for SE Asia, Apple i-phone…

Arbitrage：Making profit out of distance：Infosys, UNIQLO….

AAA Triangle by P. Ghemawat

Shift of global strategies

Ghemawat(2007)

Economic valuation of global strategy

• Purpose of strategy: long term profit, valuation• Supply side story

– Local cost advantage (arbitrage)– Scale economy by global supply chain (aggregation) – Globalization of value chain (production, R&D)

• Demand side story– Localization of product and services (adaptation)– Market analysis and marketing mix at local market– Globalization of value chain (marketing, R&D)

Value Chain by M.E. Porter

Value Chain and Global Strategy

Management of foreign subsidiary

Prahalad and Doz (1987)

IR Grid by home country

（Bartlett and Ghoshal，1989）

Influence of Industry Characteristics?

（Bartlett and Ghoshal，1989）

Local customization(commodities)

Efficiency(home appliance)

Knowledge base(telecom equip.)

Philips Panasonic

KaoUnilever

Ericsson

Multinational Global International

Case material: China and India

• India: factory or market? Please provide at least one example in each Quadrant of factory or market matrix.

• Pick up one industry of your favorite. Discuss attractiveness in India over China by CAGE framework.

• Then develop your global strategy plan based on AAA framework (which “A” should you put your focus on?)