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Cornell University S.C.

Johnson Graduate School of Management

NBA 5840: International Competitive Strategy
Spring, 2009
Professor: Office: Phones: Fax: Email: Office Hours: Prerequisites: Gary Katzenstein, Ph.D. Sage Hall 401F (607) 255-7469 (607) 254-4590 gjk29@cornell.edu By appointment, or Wednesdays, 2-5pm At least one course on Corporate Strategy

COURSE DESCRIPTION Introduction: Most influential companies do business outside their home countries. Few companies who aspire to superior profitability are able to achieve this within the bounds of a single national market. For an increasing number of businesses, competing internationally is no longer an option. Moreover, the actions of non-North American multinationals means that today more than ever, competitive activity must have a strong defensive element as well. Success in international markets is not a result of luck, but of skill and persistence. Developing proficiency in international strategy translates into competitive advantage. Building competence in this area means understanding, at a sophisticated level, how companies succeed in the most demanding competitive arenas, which are usually found beyond their head office nation’s borders. The approach we will take in this course is practical and problem-oriented. It is intended to enable you to acquire proficiency at strategy formulation and implementation in an international context. The course will do this by developing and applying concepts, analytical frameworks, and intuition to the strategic issues that face real-world multinational corporations, regardless of their size, industry or location.

The four fundamental issues addressed in the course can be stated as follows: • How can the firm take advantage of the global market place?
Spring Term, 2009

NBA 5840—International Competitive Strategy


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How does a corporation create economic value through its multimarket activities? How must the corporation be structured and managed to realize the benefits of its multimarket activities? When should those activities be undertaken inside the corporation, rather than accessed through contracts, joint ventures or strategic alliances? The course will offer analytical frameworks developed to address these questions and will examine how these frameworks apply in concrete business situations. COURSE FORMAT The majority of class time will be devoted to the analysis and discussion of corporate strategy and global competition cases. Short lectures (and selected videotapes) will also be used to elaborate on key theoretical models and frameworks or to reinforce crucial concepts. These lectures, however, will be subordinate to the case analysis. Cases provide a natural "test-bed" for theory and provide vivid examples that aid memory of concepts. The case method also gives students a chance to deal with ambiguity. Most cases do not have obvious "right" answers. Managers must be able to function in situations where the right answer is not known, without falling into the trap of assuming that any answer is as good as another. Some analyses and proposed strategies are clearly wrong, and some are clearly better than others. A popular phrase in case analysis classes is "There are no right answers, but there are wrong answers." Case discussion techniques provide a chance to learn the meaning of analytical rigor in situations other than open-and-shut problems. Preparing It is important you understand basic strategy concepts such as: • • • • • • Industry analysis General environment analysis Competence Value chain analysis Generic strategies Corporate and business strategy

These are the fundamental underpinnings of the field and should have been covered in your courses so far.

COURSE EVALUATION
Course grades will be determined by students’ relative performance on the following three course components: Course Participation 30%
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(2) Short Case Analyses (Indiv./Pairs) Company Strategic Analysis (Group)

35% 35%

NBA 5840—International Competitive Strategy

Spring Term, 2009

COURSE PARTICIPATION/COMMITMENT Course participation will primarily be evaluated in terms of in-class participation and, to a lesser extent, general commitment to the course, including attendance (see below for the latter). Case courses work best when everyone is an active participant. In grading in-class participation, I will look at both the quantity and quality of your class contributions. I recognize that some students are far more comfortable than others with in-class participation. However, it is important you make an effort every class to contribute in some meaningful way. Please feel free to come and discuss with me ways to enhance your participation. The evaluation of your class contribution will be based on your understanding of the situation, your recommendations for action and their connection to your understanding or analysis, and your effectiveness in communicating this information. Classroom contributions are evaluated using the following criteria after each class: Excellent: Participant offers a complete analysis and action plan; synthesizes contributions; summarizes and/or moves class discussions ahead and contributes to the learning of others.

Satisfactory: Participation reflects good analysis and action plan; participant constructively criticizes others’ ideas and substantiates position with well-rounded analysis. Unsatisfactory: Participant is unprepared when called upon; analysis or action plan others substantiated or reasoning faulty; criticisms directed at others vs. their ideas; absence.

Readings/Cases
In designing the course, I’ve tried to respect the busy lives that you all have. Therefore, although the reading packet is hefty, I’ve prioritized readings so that you will have a sense of what you must read, what is recommended, and what is optional or for future reference. As you can see on the attached schedule, each class is comprised of two kinds of assignments, Foundation Readings and Articles/Cases. In the Foundation Readings column each session’s assignment consists of a few core readings, sometimes a recommended article, and some optional or reference readings. Optional readings are noted as such. The foundation readings are critical to your understanding of international competitive strategy. Recommended articles are also quite useful for the same purposes but not critical. The remaining articles provide alternative perspectives in case you are interested, or if the required readings do not satisfy you. The Articles/Cases column included some short articles articles will sometimes come the course Website) to guide provides those materials that we will discuss. I have and several cases virtually every class date. The short with questions (I will e-mail them and/or post them on your reading. Be prepared to answer them during class
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discussion. These articles will provide practical insights that illustrate the material more powerfully than straight lecture material. Also, questions for the main caseswill be placed online for your convenience. TEXT, READINGS, AND CASES Course Web Site The course has a Web site on Blackboard where I will post the course syllabus, references to interesting readings on the Web, and lecture notes as the course progresses. Also, some of the textbook readings and some other articles will be on the Blackboard Website. Reading Packet The main readings and cases for this course come in the course packet. The major focus will be on articles from the business press (WSJ, HBR, International Herald Tribune, Economist, and Business Week) and cases from Harvard Business School. The packet is available in Center Sage. Library Reserve There should also a copy of the course reading pack on reserve for NBA 5840.

COMMUNICATION AND FEEDBACK
Feedback is a critical part of any learning experience, both for you as a student and for me as your instructor. You may communicate with me in any number of ways. I encourage you as individuals and as groups to come and talk to me about any aspect of the course or your work. You are welcome to call me in my office and leave a voice mail message, or make an appointment for another time. The surest way to reach me is via Email. In addition, I will establish a feedback committee that I hope will give me feedback once a weekafter class or when convenient. The feedback committee only takes about five minutes after class and will help ensure that students get what they want out of the class and that problems and issues that arise are taken care of to make the class a valuable and enjoyable learning experience. x

NBA 5840—International Competitive Strategy

Spring Term, 2009

ABOUT ME
This is my 3rd year at Cornell. Prior to joining the Johnson School, I was on the faculty (Management of Organizations Department) for 8.5 years at the Hong Kong University of Science and Technology. I received my Ph.D. in Organizational Behavior from the Tepper School of Business, Carnegie Mellon University. I also have an M.B.A. from UCLA/Anderson, and an M.S. in Computer Science, also from UCLA. My bachelor’s degree, in Computer Science, is from Brown University. I’ve spent a good deal of my career overseas, having living in Hong Kong as a professor, in South Korea, where I helped start a business and taught, and in Japan, where I got to work for Sony and a large Japanese software company and research center as a Luce Scholar. In my previous careers, I’ve worked as a freelance author, freelance writer, technical writer, software analyst/programmer. I am passionate about helping students improve their communication skills, particularly their writing.

ACADEMIC INTEGRITY
Academic integrity is a critical value of the University community. Integrity violations destroy learning communities and the spirit of inquiry that is vital to the effectiveness of the University. Anyone caught cheating or plagiarizing will fail the class. Plagiarism is copying anything from another source without citing that source.As you probably know, Cornell subscribes to various services that can check your paper for plagiarism including Turnitin. If these sites determine that you have copied from previous Cornell students or the Internet, there will be serious consequences. If you are not going to be able to make a deadline on a case write-up, please do me (and yourself) a favor. First, do not sit in the classwhere we discuss the case. Second, please let me know beforehand (if possible) that you will not make the deadline, and we can discuss how to go from there. If you do not do either, you will fail the case, and obviously this will have serious consequences for your overall grade. Because some of you come from cultures where what is considered academically acceptable vs. cheating may vary I wanted to be very clear about this. With the Internet so ubiquitous in our lives some people have suggested that doing some "research" on the Internet about a case might be a good way to start thinking about things. In the U.S., (at least in this class) this is clearly considered cheating and is fully unacceptableat the Johnson School. Therefore, do not type the name of the case into some search engine looking for someone else's answers or thoughts on the case. In the past, a number of my students have done just that and eventually purchased answers to cases through sleazy websites that sell such answers. Others have simply copied other answers posted on the Internet. I can assure you that Turnitin in and the various other cheating protection services will find those answers along with previous answers submitted by Cornell students and will bring them to my attention. Therefore, please do not even consider using the Internet for any sort of research or background checks related to the cases in this class. Again, I will be very strict with any violations of integrity, so do me and yourself a favor and please do your own work.

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Class Schedule/Readings and Cases
Note: (*) designates Key Readings
Date Topic Foundation Readings • "What Is an American Car?” • Optional: Friedman, The World is Flat • Optional: Ghemawat, Why the World Isn’t Flat • Optional: Florida, “The World Is Spiky” • Skapinker, “The battle for global business is not yet won” • (*) Text, pp. 1-13 • (*) Managing Global Expansion: A Conceptual Framework • (*) When You Shouldn’t Go Global • Optional: Rangan, “Seven Myths to Ponder Before Going Global” Cases/Articles

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March 9

Introduction

• 2 March 11 Global Strategies

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Case: March of the MiniMultinati onals (location ) Startup Firms Solve Challeng es of Going Global (location ) SAP (org) Lenovo (various)

SPRING BREAK • • • March 23 Environment of Multinationals • • (*) Distance Still Matters (*) Khanna, “Strategy That Fits Emerging Markets” (*) Hill, pp. 189-193 (Intl Strategy) Optional: Vietor, How Countries Compete Optional: Oil, Politics, and Corruption • How Do You Say “Web”? Article Ajinomot o Articles Miners Shun Mineral Wealth of the Philippin es

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• 4 March 25 Transferring Home Strategies •

(*) Global Strategy…In a World of Nations (global vs. local strategy) Converting Global Presence into Global Advantage

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Wal-Mart in China Vsdr Wal-Mart in Europe Case

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March 30

Entry Strategies

(*) Root, Designing Entry Strategies for International Markets.” In Entry Strategies for International Markets. New York: Lexington Books, 1990, pp. 1-23 • • •

Lincoln Electric Case

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April 1

Globalization Drivers/ Integration Midterm Due Strategic • (*) The Design and 8

Zara: Fast Fashion Case OR Bollywood Set Go Global or No Case Dissolution of

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April 6 April 8

• • Collaboration: Alliances/JVs

Management of IJVs (*) Managing International Alliances Optional: Collaborate with your Competitors — And Win

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Chinese-South Korean Auto Venture Could Serve as Cautionary Tale Danone/Wahaha Reading Set The Renault-Nissan Alliance Case Optional: Game Over: Amazon’s Dream Alliance

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Managing Within MNCs
Topic Foundation Readings • (*) BGB, pp. 648-660 • Tap Your Subsidiaries for Global Reach • Optional: The Five Minds of a Manager Case(s) Silvi o Nap oli at Schi ndler India (A) Case Send Jobs to India P&G SK-II Case •

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April 13

Subsidiaries/Count ry Managers/Implem enting Global Strategy

• • 10 April 15 Transferring Strategic Advantage/Innova tion • •

BGB, pp. 333-349 (*) “The Structures Behind Global Companies” (*) “Is Your Innovation Process Global?” Shenkar and Luo, Organizing and Structuring Global Operations, Ch. 11 (Skim) •

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April 20

Managing Subsidiaries and Strategy

(*) Managing Executive Attention in the Global Company (*) Optional: Unleash Innovations in Foreign Subsidiaries

BRL Hard y Case

12 12 April 22 Coordination and Control vs. Strategy

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(*) Making Global Strategies Work (pp. 11- top of 19 only) Optional: Shenkar and Luo, Managing Global R&D

Siem ens AG Case

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April 27

MNCs in Emerging Countries

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The Challengers A Bigger World The Empire Strikes Back The New Champions

Haier: Taking a Chinese Company Global Haier’s Purpose

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Summary

TBA

TBA

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Team Global Strategic Analysis
The objective of the team project (groups of 4 or 5) is to apply the tools of global strategic analysis to evaluating the strategy and performance of a global enterprise, and based on your assessment and analysis, make recommendations for the international aspects ofits future. Each team will take the role of strategy consultants hired by the company as part of a wide-ranging strategic review to appraise its current global strategy versus at least one important competitor, and establish direction for the future. Companies: The international company your team chooses to study can be located in North Americaor elsewhere. A word of advice – regardless of which company you choose, it makes sense to pick one about which there is much information available either directly, from analysts, or on the Internet. That likely means you’ll want to choose a public rather than private company – but your choice should of course depend partly on your interest and partly on the availability of information. Caveat: You cannot use the company you are studying for any other course’s assignment. Select a different enterprise and industry. The advantage to you is broadening your exposure to a number of different business situations and industry contexts. Please advise me by e-mail by the end of Week 3as to the company whose international strategy you propose to examine. I will confirm availability. Since I only want a company studied by one team in the course, the firstcome first-served rulewill apply. Hence, email or tell methe name of the target company to me as soon as you can so as to raise the odds you will receive your first choice. Content: The content of your work will vary according to the characteristics and circumstances of the company and its industry. However, at minimum, you need to include the following items: • Identification of current international strategy: ○ What is the company’s current/recent strategy in relation to the international scope of its activities and to the basis on which it has attempted to establish competitive advantage over its rivals?

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Evaluation of current performance: ○ How successful is the current international strategy in terms of the recent performance of the company? (You can includeanalysis of available financial data, which examines the company over time and in relation to its industry or against at least one key competitor.) Ideally, you should identify how the company’s international strategy affects its performance – what are the measurable and non-measurable consequences of the choices it has made? Appraisal of internal resources and capabilities: ○ What is the basis of the company’s competitive advantage? How easy is it for the company to replicate this competitive advantage in overseas markets? ○ On the basis of an appraisal of the company’s resources and capabilities, what do you perceive to be the principal strengths and weaknesses of the company vis-à-vis its choice of international strategy?

Appraisal of the industry and general environments: ○ What are the globalization drivers in this industry? How strong are they relative to the forces for national differentiation? ○ What are the principal developments in the company’s industry environment, in terms of the factors that will influence the overall attractiveness of the industry and the determinants of relative success of companies in it? ○ Here you will want to use industry and general environment analyses. (see suggestions for your analyses in the appendix).

Key issues arising ○ What are the most urgent problems/issues/opportunities that need attention through international strategy, based on your analyses? Recommendations

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What would you recommend to the CEO about the international dimension of the company’s future? How do you envisage the company’s international strategy being amended in order to achieve a better match between, on one hand, the requirements of the external environments it faces and, on the other, the company’s internal potential for creating and deploying competitive advantage? How would you establish the priority of your recommendations in terms of urgency, impact, and time horizon?

Sources: For larger companies, you will be able to rely heavily on published data, including annual reports, quarterly filings, newspaper articles, media releases, analysts’ reports, and so on. It is important to probe the thinking that lies behind the company’s international strategy: examine carefully any statements by the company CEO or chairman that may touch on this topic. There is no requirement to do in-person interviews, though feel free to approach the company in question for information if you wish. Advice: Remember that this is an assignment about the international dimension of a company’s business. It is easy to become focused on making all types of recommendations about a company’s domestic business or corporate strategy while forgetting its international dimensions. Please don’t fall into that trap. I am looking for your use of course frameworks and course concepts first and foremost. If your analysis of the company’s international position requires some attention to their domestic corporate or business strategies, fine, but concentrate your analysis on international operations. Hints for Doing Well: The following advice has been culled from my experience with similar projects, and is offered to you so that you avoid some errors that other MBA students have made, mostly through inadvertence.
• • Integrate your key findings into your final paper – don’t outsource to appendices. Industry analysis is a key element of this project. Conduct it at the industry level. Please don’t avoid it. Papers that do not include it (or that do not do it thoroughly) won’t do well. Choose an attractive project – if you select something too big, you won’t get deep enough. If you choose something too small, you’ll get bored. 14

Give some thought to alternative explanations for the situation you’ve encountered. What has the company tried and rejected, can you create a rationale for the behavior you’ve observed, etc.

Output: The project principal output is a written report that will be no more than 15 pages long (plus charts, tables, etc.) and is due Wednesday, April 29th(the last day of class). Depending on the logistics/class size, I may have students do a brief presentation of their findings.

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Appendix: Helping You Analyze National and Industry Environments
1) Country Analyses
Here are some issues to think about in your country analyses: • • Key industry clusters and sectors (e.g., Porter’s four “diamond” elements) Political, regulatory, and legal environments (e.g., privatization, taxation, entry requirements, preferential trade agreements, etc.) Macroeconomic indicators (e.g., GNP, inflation, foreign debt, etc.) Capital controls (e.g., repatriation, currency flows, etc.) Risks (e.g., political stability, exchange rate exposure, etc.) Social conditions (e.g., population density, wealth distribution, radicalism, etc.) Social stability (e.g., conflicts, riots, demonstrations, crises, assassinations, guerrilla warfare, internal security forces, ethnic tension) Government (e.g., political parties/factions, relevant legislation, constitutional changes, executive power) National institutions (e.g., primary types of business structures and ownership/governance approaches, etc.) Raw and basic materials (e.g., energy, food, minerals, etc.) Physical and technical infrastructure (e.g., the ability to support its technology needs via Internet hosts and ISPs, access to computing technology, computer literacy, reliable power, etc.) Demographics and population characteristics (e.g., the age distribution and what effect trends will have on such future needs as retirements and education, education level and skills available vs. net exporter or intellectual capital, cost of living and wage structure, etc.) Employment laws (e.g., employee discrimination, sexual harassment, union, wages, hours of work, child labor, benefits, paid leave, family medical leave, pensions, profit sharing, health and safety)
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Legal strictures and expectations for workforce inclusion (e.g., diversity, power distance) Human, business, and environmental concerns of the local citizenry Social cultures (e.g., business etiquette), value expectations, ethical norms, moral issues, attitudes toward xenophobia, nationalism, corruption, nepotism Market requirements (e.g., standardization vs. localization) Relationships with non-governmental organizations (e.g., IMF, Transparency International, UN, World Bank, etc.)

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2) Industry Analysis
Here are some issues to think about in your industry analysis: ○ ○ Historical trends, time lines, and projections of key events (e.g., market demand and growth patterns) Competitors, nature of rivalry, and bases for competing today (e.g., five forces, market entry/exit, sector analysis, value propositions and/or value chain, etc.) Global supply chain and distribution channels Unique characteristics (e.g., asset intensity, leading indicators, intangibles and intellectual property, etc.) Conventional metrics used (e.g., cost structure vs. revenues and volumes breakdown, ratio analysis, “red flags,” etc.) that are unique to the industry Typical core competencies and competitive advantages (e.g., best practices for product positioning, branding, etc.) Environmental/growth opportunities and threats (e.g., market penetration, market development, product development, diversification, integration, etc.) Most important stakeholders (e.g., financiers, customers, suppliers, employees, government, society interest groups and the press, etc.) Social/ethical trends and issues (e.g., environment, poverty, human rights, etc.) International trade patterns and projections (e.g., methods of exporting/importing, contract manufacturing/sourcing, franchising, licensing, etc.) Technical influences, challenges, innovations, patents, R&D, etc. and changes including

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