Slides 8 Global Strategy(1)
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Transcript of Slides 8 Global Strategy(1)
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8/3/2019 Slides 8 Global Strategy(1)
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Strategic Management/
Business Policy
Slides 8 Global Strategy
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Questions About Global Competition
What is an international strategy?
What is the value of global strategies?
Why are some countries more competitivethan others in global competition?
How do companies diversify internationally?
How do you organize a global company?
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FACTOR CONDITIONS
DEMANDCONDITIONS
RELATING AND
SUPPORTINGINDUSTRIES
STRATEGY, STRUCTURE,
AND RIVALRY
Porters National Diamond Framework
1. FACTOR CONDITIONSHome grownresources/capabilities more importantthannatural endowments.
2. RELATED AND SUPPORTING INDUSTRIESKey role ofindustry clusters3. DEMAND CONDITIONSDiscerning domestic customers drive quality & innovation
4. STRATEGY, STRUCTURE, RIVALRY. E.g. domestic rivalry drives upgrading.
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OmahaTelemarketingHotel ReservationsCredit Card Processing
Wisconsin / Iowa / IllinoisAgricultural Equipment
DetroitAuto Equipmentand Parts
RochesterImaging Equipment
Western MassachusettsPolymers
BostonMutual FundsMedical Devices
Mgmt. ConsultingBiotechnologySoftware and
NetworkingVenture Capital
HartfordInsurance
ProvidenceJewelryMarine Equipment
New York CityFinancial ServicesAdvertisingPublishingMultimedia
Pennsylvania / New JerseyPharmaceuticals
North CarolinaHousehold FurnitureSynthetic Fibers
Hosiery
Dalton, GeorgiaCarpets
South FloridaHealth TechnologyComputers
Nashville / LouisvilleHospital Management
Baton Rouge /New OrleansSpecialty Foods
Southeast Texas /LouisianaChemicals
DallasReal EstateDevelopment
WichitaLight AircraftFarm Equipment
Los Angeles Area
Defense AerospaceEntertainment
Silicon ValleyMicroelectronicsBiotechnologyVenture Capital
Cleveland / LouisvillePaints & Coatings
PittsburghAdvanced MaterialsEnergy
West MichiganOffice and Institutional
Furniture
MichiganClocks
San DiegoGolf EquipmentBiotech/Pharma
MinneapolisCardio-vascularEquipmentand Services
Warsaw, IndianaOrthopedic Devices
ColoradoComputer Integrated Systems / ProgrammingEngineering ServicesMining / Oil and Gas Exploration
Las VegasAmusement /CasinosSmall Airlines
OregonElectrical MeasuringEquipmentWoodworking EquipmentLogging / Lumber Supplies
SeattleAircraft Equipment and DesignSoftwareCoffee Retailers
BoiseInformation TechFarm Machinery
Geographical Distribution of Clusters
Source: Adapted from Professor Michael E. Porter, Harvard Business School
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Value of Global Strategies
Gain Access to New Customers for CurrentProducts or ServicesDisneyland Tokyo, EuroDisney
Gain Access to Low-Cost Factors of
ProductionAchieving global economies of scale in theautomobile industry
Leverage Core Competencies
E.g., Honda developing and leveraging itscompetencies in producing motors formotorcycles, automobiles, snow blowers andlawn mowers.
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Value of Global StrategiesStretching to Develop New CoreCompetencies
E.g., Pepsi Restaurants trying to develop newskills in upscale casual dining.
Managing Corporate Risk
As global capital markets become moreefficient over time, the benefit provided bythis corporate strategy diminishes.
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International Business Strategy:
A Typology
Location of Production
Glo
balintegration:control
&c
ommunication
GlobalStrategy
TransnationalStrategy
InternationalStrategy
MultidomesticStrategy
High
Low
Concentrated Dispersed
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Organization and drivers of
performanceIncreasingly dispersed production means
Fewer economies of scale (cost)
But, (probably) lower transportation costs (cost)Local responsiveness (differentiation)
More locations vulnerable to war, disasters, currency collapse (risk)
But, no one unit as critical (risk)
Greater global integration of control & communication means
Higher costs of coordination (cost)
But, lower costs from learning across production sites (cost)
Less local responsiveness (differentiation)
But, more control of reputation, marketing, quality (differentiation)
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International strategyGood forfirms startingtheirinternationalexpansion(Why?)
Product is
hard tolocalize, butmarketing,etc. can be
Less learning
Location of Production
Globalintegration:
control
&
communication
GlobalStrategy
TransnationalStrategy
International
Strategy
Multidomestic
Strategy
High
Low
Concentrated Dispersed
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Multi-domestic strategyProducts andservices tailoredto local markets
Focus oncompetition ineach market
Prominentstrategy amongEuropean firms
due to broadvariety ofcultures andmarkets inEurope
Low learningLocation of Production
Globalintegration:
control
&
communication
GlobalStrategy
TransnationalStrategy
International
Strategy
Multidomestic
Strategy
High
Low
Concentrated Dispersed
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Global StrategyProductsstandardizedacross markets
Economies ofscale
Not responsiveto local markets
Requiresresource sharingandcoordinationacross borders
Location of Production
Globalintegration:
control
&
communication
GlobalStrategy
TransnationalStrategy
International
Strategy
Multidomestic
Strategy
High
Low
Concentrated Dispersed
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Transnational StrategyGlobal efficiencyandlocalresponsiveness
Difficult toachieve:
Strong centralcontrol andcoordination toachieveefficiency and
local flexibilityDecentralizationto achieve localmarketresponsiveness.
Location of Production
Globalintegration:
control
&
communication
GlobalStrategy
TransnationalStrategy
International
Strategy
Multidomestic
Strategy
High
Low
Concentrated Dispersed
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Entering foreign marketsHow should a firm sell its goods into a foreignmarket?
All the normally challenges of cooperation,plus
Language/social/legal differences
Preference for local goodsCommunications costs and delays
Trade barriers
Foreign currency
Transportation costs
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A spectrum of entry modes
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How Should We Enter A Foreign Country?
Entry Mode Advantages Disadvantages
Exporting High Experience &Location Economies
Transport Costs Trade Barriers Agency
Licensing Low entry costs Low control
Low learning Low coordination
Franchising Low entry costs Low control Low coordination
Joint Ventures Sharing of costs &knowledge
Political Risk Low control Diffusion of knowledge
Wholly OwnedSubsidiaries
High Learning Protection of Tech. High coordination
High costs & risks
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Cooperative StrategiesStrategic alliances arepartnerships between firmswhereby their resources,capabilities, and core competenciesare combined to pursue mutual
interests in designing,manufacturing, or distributinggoods or services.
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Types of Corporate-Level Strategic Alliances
Diversifying Alliancese.g., Samsung Group joins with Nissan tobuild new automobiles
Synergistic Alliancese.g., Sony shares development with many
small firmsFranchising
e.g., McDonalds or Century 21
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Cooperative StrategiesFranchising is an alternative to
diversification that is considereda cooperative strategy based ona contractual relationship.
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A national presence can be developed more quickly andwith a smaller investment on the part of the franchisor.
Qualifications for franchise ownership can be set andenforced.
Money is obtained when goods are delivered rather thanwhen they are sold.
Agreements can be drawn up that require franchisees toabide by stringent regulations set by the franchisor.
Because franchisees are owners and not employees,they have a greater incentive to work hard.
After a franchisee has paid for the franchise, thefranchisor also receives royalties or sells products to the
individual proprietor.
Franchisor Pros
Pros & Cons of Franchising
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Individual franchisees can ruin the overall image andreputation of the franchise if they do not maintaincompany standards.
Lack of uniformity adversely affects customer loyalty
Intrafranchise competition is not desirable.The resale value of individual units is injured iffranchisees perform poorly.
An ineffective franchise unit directly injures the
franchisors profitability from the sales of services,materials, or products to franchisees, or from royaltyfees.
Franchisees, in greater numbers, are seeking
independence form franchiser rules and regulations.
Franchisor Cons
Pros & Cons of Franchising
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Pros & Cons of Franchising
An individual businessperson can own and operate a retailenterprise with a relatively small capital investment.
Franchisee acquires a well-known name and goods orservice line.
Standard operating procedures and management skillsare taught to the franchisee.
A cooperative marketing program is usually employed(e.g, national advertising) that could not otherwise be
afforded.The franchisee obtains exclusive selling rights for aspecified geographical territory.
Purchases may be made more cheaply because of
volume.
Franchisee Pros
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Oversaturation may occur if too many franchisees arelocated in one geographic area.
Because overzealous selling of franchises, the franchisormight sell to underfunded or incompetent buyers.
A franchisee may be locked into a contract purchasingprovision requiring purchases through the franchisor orapproved vendors
Cancellation provisions may give the franchisor the right to
cancel a franchise if any provison of the franchiseagreement is not met
Franchise agreements may be of short duration.
Royalties often are a percentage of gross sales, regardless
of the franchisees profits.
Franchisee Cons
Pros & Cons of Franchising
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Cooperative StrategiesAnetwork strategy is the
alliance-related actions taken bya group of interrelated andcomparable firms to serve the
common interests of allpartners.