CHAPTER 5: DESIGNING A GLOBAL

STRATEGY

Lecturer: Đoàn Thị Ngọc Thúy Ph.D.

 Learning objectives
By the end of the chapter you should be able to:
 Identify a global strategy by breaking down all its
elements
 Contribute meaningfully to the formulation of a global
strategy
 Describe a global business system

 Identify the sources of competitive advantages in a

given company

16-2
 Introduction
 In this chapter, a framework for the formulation of global strategies
is proposed, based on the experience of leading global companies. một
khuôn khổ để xây dựng chiến lược toàn cầu được đề xuất, dựa trên
kinh nghiệm của các công ty hàng đầu thế giới.
 Define what business strategy is about and how it applies to global
companies. xác định chiến lược kinh doanh là gì và nó áp dụng như
thế nào đối với các công ty toàn cầu
 The example of how Samsung Electronics has developed its global
strategy. ví dụ về cách Samsung Electronics đã phát triển chiến lược
toàn cầu của mình.

16-3
 A company business strategy

 A company business strategy is a set of fundamental

choices which defines its :Chiến lược kinh doanh của công
ty là một tập hợp các lựa chọn cơ bản nhằm xác định chiến
lược kinh doanh của công ty.
 Long-term objectives:Mục tiêu dài hạn

 Value proposition to the market :Đề xuất giá trị cho thị
trường
 How it intends to build and sustain a competitive
business system :Cách thức dự định xây dựng và duy trì
một hệ thống kinh doanh cạnh tranh
 How it organizes itself: Cách nó tự tổ chức

4
 Insert 5.1: Origin, content, purpose and drivers of
strategy : Nguồn gốc, nội dung, mục đích và động lực
của chiến lược
 Strategy (from the Greek, stratos (an army) and agein (to lead)) has
traditionally been a military art. Chiến lược (từ tiếng Hy Lạp, stratos (quân
đội) và agein (lãnh đạo)) theo truyền thống là một nghệ thuật quân sự.
 The ancient Chinese military theorist, Sun Tzu (Tôn Tử) (c. 500 BC) stated
that ‘the supreme art of war is to subdue (đánh bại) the enemy without
fighting’. Nhà lý luận quân sự Trung Quốc cổ đại, Tôn Tử (Tôn Tử) (khoảng
500 TCN) đã khẳng định rằng ‘nghệ thuật chiến tranh tối cao là khuất phục
(đánh bại) kẻ thù mà không cần đánh’.
 Strategy as an art of war was transferred into a business context in the
early 1960s. This does not mean that there was no ‘strategy’ behind business
decisions before this; but there were no formal theories of business strategy.
Chiến lược như một nghệ thuật chiến tranh đã được chuyển vào bối cảnh
kinh doanh vào đầu những năm 1960. Điều này không có nghĩa là trước đó
không có “chiến lược” đằng sau các quyết định kinh doanh; nhưng không có
lý thuyết chính thức nào về chiến lược kinh doanh. 5
 Insert 5.1: Origin, content, purpose and
drivers of strategy
 There are several schools of thought about what
business strategy is, but all schools recognize that
business strategy has to do with choice and
investments. A business strategy will generally cover
the following:
 Ambition: Choice of long-term objectives for the business.
 Positioning: Choice of products and customer segments and
of a value proposition to customers.
 Capability building: Choice of investments in order to create
a business system that is able to deliver value competitively.
 Organization: Choice of people, structures, processes and
systems.
6
 Insert 5.1: Origin, content, purpose and
drivers of strategy
 The concept of strategy may apply at various levels in a
corporation (see Figure 5.1). Khái niệm chiến lược có thể áp dụng
ở nhiều cấp độ khác nhau trong một công ty
 The most frequent distinctions are: Sự khác biệt thường gặp nhất là:
 Business strategy (also called competitive strategy) is applied at the
level of a business operating in a particular industry segment. It
defines the way the business wants, and is able, to compete in its
segment. Chiến lược kinh doanh (còn gọi là chiến lược cạnh
tranh) được áp dụng ở cấp độ doanh nghiệp hoạt động trong một
phân khúc ngành cụ thể. Nó xác định cách doanh nghiệp muốn và
có khả năng cạnh tranh trong phân khúc của mình.

7
Figure 5.1 Business, corporate and global strategy
8
 Insert 5.1: Origin, content, purpose and
drivers of strategy
 If the market in which the firm operates is global, its business strategy
will be a global business strategy that defines its long-term
objectives and selects its value proposition for the world market.
Nếu thị trường mà công ty hoạt động là toàn cầu, chiến lược kinh
doanh của công ty sẽ là chiến lược kinh doanh toàn cầu xác định các
mục tiêu dài hạn và lựa chọn đề xuất giá trị cho thị trường thế giới.
 A global business strategy will also build, integrate and coordinate its
business system to gain and sustain a global competitive advantage,
and put in place an organizational system to manage its operations
worldwide. Chiến lược kinh doanh toàn cầu cũng sẽ xây dựng, tích hợp
và điều phối hệ thống kinh doanh của mình để đạt được và duy trì lợi
thế cạnh tranh toàn cầu, đồng thời đưa ra một hệ thống tổ chức để
quản lý các hoạt động của mình trên toàn thế giới.

9
 Insert 5.1: Origin, content, purpose and
drivers of strategy
 Corporate strategy is applied at the level of a company engaged
in different business segments: the multi-business corporation.
Chiến lược công ty được áp dụng ở cấp độ một công ty tham gia
vào các phân khúc kinh doanh khác nhau: tập đoàn đa ngành.
 It essentially defines the portfolio of businesses in which the
corporation wants to operate and the resource allocation pattern
among those businesses. Về cơ bản, nó xác định danh mục đầu tư
của các doanh nghiệp mà công ty muốn hoạt động và mô hình
phân bổ nguồn lực giữa các doanh nghiệp đó.

10
 Insert 5.1: Origin, content, purpose and
drivers of strategy
Purpose and drivers of strategy:Mục đích và động lực của chiến lược
 The purpose of business strategy is to build and sustain a competitive
business system in selected markets leading to economic value
creation. Mục đích của chiến lược kinh doanh là xây dựng và duy trì
hệ thống kinh doanh cạnh tranh ở các thị trường được lựa chọn
nhằm tạo ra giá trị kinh tế.
 Economic value is created when the revenues generated by the

business is equal to or larger than the total cost of doing business. Giá
trị kinh tế được tạo ra khi doanh thu do doanh nghiệp tạo ra bằng
hoặc lớn hơn tổng chi phí kinh doanh.

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 Insert 5.1: Origin, content, purpose and
drivers of strategy
Economic value is driven by two major forces:Giá trị kinh tế
được thúc đẩy bởi hai lực lượng chính:
- The macro structural characteristics of the industry in which
the company operates (Porter, 1980) Các đặc điểm cấu trúc vĩ
mô của ngành mà công ty hoạt động (Porter, 1980)
- The ability to build and sustain competitive advantages
(Porter, 1985) Khả năng xây dựng và duy trì lợi thế cạnh tranh
(Porter, 1985)

12
Figure 5.2 The purpose of strategy
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Example 5.1
Samsung Electronics

 What successful lessons we can learn from

the case of Samsung Electronics?

14
Framework for a global strategy

 A global strategy is made up of four major

components (see Figure 5.4):
 Global strategic ambition
 Strategic global positioning

 Global business system

 Global organization

15
Figure 5.4 Global strategy framework
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 Global ambition:Tham vọng
toàn cầu
 The global strategic ambition expresses the role a
company wants to play in the world marketplace.
Tham vọng chiến lược toàn cầu thể hiện vai trò mà
một công ty muốn thể hiện trên thị trường thế giới.
 It defines two types of perspective: the rationale for
globalization and the scope of the global presence. Nó
xác định hai loại quan điểm: cơ sở lý luận cho toàn
cầu hóa và phạm vi hiện diện toàn cầu.

17
 Rationale for globalization:
market/resource/capability-seeking objectives

 According to John Dunning, global expansion can

be driven by three kinds of motive: Theo John
Dunning, việc mở rộng toàn cầu có thể được thúc
đẩy bởi ba loại động cơ:
 market-seeking: tìm kiếm thị trường
 resource-seeking: tìm kiếm tài nguyên

 capability-seeking : tìm kiếm năng lực

18
 Rationale for globalization:
market/resource/capability-seeking objectives

 Market-seeking objectives relate to the pursuit of sales

expansion in international territories. Mục tiêu tìm
kiếm thị trường liên quan đến việc theo đuổi việc mở
rộng doanh số bán hàng trên các lãnh thổ quốc tế.
 This can be achieved by exports or local operational
subsidiaries. :Điều này có thể đạt được bằng cách xuất
khẩu hoặc các công ty con hoạt động tại địa phương.

19
 Rationale for globalization:
market/resource/capability-seeking objectives

 Resource-seeking objectives relate to accessing natural and human

resources in international territories in order to use those resources
for global competitiveness. Mục tiêu tìm kiếm tài nguyên liên quan
đến việc tiếp cận các nguồn tài nguyên thiên nhiên và con người
trên các lãnh thổ quốc tế để sử dụng các nguồn tài nguyên đó cho
khả năng cạnh tranh toàn cầu.
 This is achieved by contractual sourcing,
direct exploitation of mining or agriculture, or by setting up
offshore production centers. Điều này đạt được bằng cách tìm
nguồn cung ứng theo hợp đồng, trực tiếp khai thác mỏ hoặc nông
nghiệp hoặc bằng cách thành lập các trung tâm sản xuất ở nước
ngoài.

20
 Rationale for globalization:
market/resource/capability-seeking objectives

 Capability-seeking objectives are aimed at capturing

innovative or logistical capabilities that international
territories may offer. Các mục tiêu tìm kiếm năng lực nhằm
mục đích nắm bắt các năng lực đổi mới hoặc hậu cần mà các
vùng lãnh thổ quốc tế có thể mang lại.
 This can be achieved by setting up local R&D centers,
logistic or hub centers, research alliances or intelligence
offices. Điều này có thể đạt được bằng cách thành lập các
trung tâm R&D địa phương, trung tâm hậu cần hoặc trung
tâm, liên minh nghiên cứu hoặc văn phòng tình báo.


21
 Scope of the global presence
 The scope of the global presence expresses how the company
views the future distribution of its sales and assets in key regional
clusters worldwide, and can be formulated into four types of role:
Phạm vi hiện diện toàn cầu thể hiện cách công ty nhìn nhận việc
phân bổ doanh thu và tài sản của mình trong tương lai tại các cụm
khu vực quan trọng trên toàn thế giới và có thể được chia thành
bốn loại vai trò:
 Global player:Người chơi toàn cầu

 Regional player:Người chơi khu vực

 Global exporter:Nhà xuất khẩu toàn cầu

 Global sourcer : Nguồn toàn cầu

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 Scope of the global presence:Phạm vi
hiện diện toàn cầu
 A company whose ambition is to be a global player aspires to
establish a sustainable competitive position in the key markets of
the world and to build an integrated business system of designs
spread over
those key markets. Một công ty có tham vọng trở thành công ty toàn
cầu mong muốn thiết lập một vị thế cạnh tranh bền vững tại các thị
trường trọng điểm trên thế giới và xây dựng một hệ thống kinh
doanh tích hợp gồm các thiết kế trải rộng trên các thị trường trọng
điểm đó.
 Sony and Samsung Electronics fit such a description, as would
Nestlé, Unilever, Ericsson, Nokia, Siemens, Shell, Canon, Procter &
Gamble, Toyota and HSBC.
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 Scope of the global presence
 A regional player aims to capture a strong competitive advantage in one of the
key regions of the world – North America, Europe or Asia – and to remain a
marginal or relatively weak competitor in the other parts. Người chơi trong khu
vực đặt mục tiêu nắm bắt lợi thế cạnh tranh mạnh mẽ ở một trong những khu vực
quan trọng trên thế giới – Bắc Mỹ, Châu Âu hoặc Châu Á – và vẫn là đối thủ cạnh
tranh cận biên hoặc tương đối yếu ở các khu vực khác.
 Companies such as Peugeot, Shiseido or Barclays would be examples of such an
ambition. Những công ty như Peugeot, Shiseido hay Barclays sẽ là những ví dụ
cho tham vọng như vậy
 The distinction between a global player and a regional player is more about the
relative importance of each major region of the world in the company’s
portfolio, rather than the stated ambition of the company in its external
communications. Sự khác biệt giữa một công ty toàn cầu và một công ty khu vực
nằm ở tầm quan trọng tương đối của từng khu vực chính trên thế giới trong danh
mục đầu tư của công ty, hơn là tham vọng đã nêu của công ty trong truyền thông
bên ngoài. 24
 Scope of the global presence
 Many companies assert that they are ‘global’, when their accounts reflect a
strong concentration of their sales to one region. Nhiều công ty khẳng định
rằng họ có tính chất 'toàn cầu', khi tài khoản của họ phản ánh sự tập trung
mạnh mẽ vào doanh số bán hàng của họ vào một khu vực.
 However, this situation may change if the company has a real ambition to
become a global player that is supported by the appropriate investment. Tuy
nhiên, tình hình này có thể thay đổi nếu công ty có tham vọng thực sự trở thành
công ty toàn cầu được hỗ trợ bởi khoản đầu tư phù hợp
 Renault, for instance, a traditional European player, has acquired controlling
positions in Nissan and Samsung automobiles, transforming the company into
a European, Asian and North American player thanks to Nissan’s operations
in the USA. Ví dụ, Renault, một tay chơi truyền thống ở châu Âu, đã giành
được vị trí kiểm soát ô tô Nissan và Samsung, biến công ty này thành một tay
chơi ở châu Âu, châu Á và Bắc Mỹ nhờ hoạt động của Nissan tại Mỹ.​

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 Scope of the global presence
 A global exporter is a company whose role is to sell in the key markets of the
world products manufactured or services operated in its home country, and that
builds foreign operations only to support the export drive. Nhà xuất khẩu
toàn cầu là một công ty có vai trò bán sản phẩm hoặc dịch vụ được sản xuất
hoặc dịch vụ tại các thị trường trọng điểm trên thế giới và xây dựng các hoạt
động ở nước ngoài chỉ để hỗ trợ cho nỗ lực xuất khẩu.
 The major aerospace or defence companies such as Boeing, Airbus and
Raytheon can be classified in this category despite the fact that they have some
supporting assets (maintenance, sales offices, etc.) outside their home region.
Các công ty hàng không vũ trụ hoặc quốc phòng lớn như Boeing, Airbus và
Raytheon có thể được phân loại vào loại này mặc dù thực tế là họ có một số
tài sản hỗ trợ (bảo trì, văn phòng bán hàng, v.v.) bên ngoài khu vực quê hương
của họ.


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 Scope of the global presence
 A global sourcer is a company that procures a large fraction of its product
components from factories located outside its base market and concentrates its
sales in its domestic market. Nhà cung ứng toàn cầu là một công ty mua phần
lớn các thành phần sản phẩm của mình từ các nhà máy nằm ngoài thị trường
cơ sở và tập trung doanh số bán hàng tại thị trường nội địa.
 In such a case the ambition would hardly qualify as global. However, many
managerial issues of integration and coordination of activities, such as in-
house factories or long-term subcontracting, would be quite similar to those
that a global company would have to face. Trong trường hợp như vậy, tham
vọng khó có thể đủ tiêu chuẩn là toàn cầu. Tuy nhiên, nhiều vấn đề quản lý về
tích hợp và phối hợp các hoạt động, chẳng hạn như các nhà máy nội bộ hoặc
hợp đồng phụ dài hạn, sẽ khá giống với những vấn đề mà một công ty toàn
cầu sẽ phải đối mặt.​


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 Scope of the global presence

 In order to assess the degree of global ambition

exhibited by companies, we will look at the
distribution of their sales, assets and personnel.
Để đánh giá mức độ tham vọng toàn cầu của các
công ty, chúng ta sẽ xem xét sự phân bổ doanh thu,
tài sản và nhân sự của họ.

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Table 5.1 Distribution of the world market by regions in selected
industries, 2014 (as a percentage of US$ value)

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 Scope of the global presence
 A pure, global company should ideally exhibit three major characteristics:
Một công ty toàn cầu, thuần túy nên thể hiện ba đặc điểm chính một cách lý
tưởng:
1. The distribution of its sales would be proportional to the distribution of
markets in its industry. Việc phân phối doanh số bán hàng sẽ tỷ lệ thuận với sự
phân bổ thị trường trong ngành của nó.
 For instance, Sony’s distribution of sales is 28% in North America, 23% in
Europe and 39% in Asia closely replicates the percentage distribution of
consumer electronic industry markets (23% in North America, 36% in
Europe and 38% in Asia). Ví dụ: tỷ lệ phân bổ doanh số bán hàng của Sony
là 28% ở Bắc Mỹ, 23% ở Châu Âu và 39% ở Châu Á gần giống với tỷ lệ
phân bổ phần trăm của các thị trường công nghiệp điện tử tiêu dùng (23% ở
Bắc Mỹ, 36% ở Châu Âu và 38% ở Châu Á).

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 Scope of the global presence
 Obviously, this may not apply to all industries, given that no two industries
have the same degree of global pressure towards globalization. Rõ ràng,
điều này có thể không áp dụng cho tất cả các ngành, vì không có hai
ngành nào có mức độ áp lực toàn cầu hóa như nhau.
 In a global industry such as the tire industry, where the distribution of
the market is 31% in North America, 30% in Europe, 35% in Asia and 4%
in the rest of the world, the distribution of revenues of the five major
players differs substantially from the industry distribution, as shown in
Table 5.2. Trong một ngành toàn cầu như ngành lốp xe, nơi phân bổ thị
trường là 31% ở Bắc Mỹ, 30% ở Châu Âu, 35% ở Châu Á và 4% ở phần
còn lại của thế giới, sự phân bổ doanh thu của năm ngành chính những
người tham gia khác biệt đáng kể so với sự phân bổ của ngành, như thể
hiện trong Bảng 5.2.

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Table 5.2 Distribution of markets and revenues in tires, 2014

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The globalization indices
 The Transnational Index (TNI), used by the United
Nations Conference on Trade and Development
(UNCTAD), is a composite ratio of the proportion of
activities outside the home country of a
multinational firm.
 For instance, in the tire industry, assuming that Europe
is the ‘home’ region of European suppliers,
Continental’s TNI would be 57, much lower than those
of Michelin (TNI = 86), Pirelli (TNI = 76), Goodyear (TNI
= 70) or Bridgestone (TNI = 76), because of its higher
concentration of activities in Europe.

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 The globalization indices
 The Global Revenue Index (GRI) represents a company’s
distribution of sales in the major world regions as a
percentage of the industry distribution of demand in the
same regions.
 If the world market in an industry is divided in the proportion
of 30% in North America, 30% in Europe, 30% in Asia, and
10% in the rest of the world, the GRI will compare the actual
distribution of sales of a company in those four major
regions with sales distribution for the industry as a
whole.
 A company with a low GRI is more concentrated in one
region, while a company with a high GRI will have a
distribution of sales similar to the distribution of the global
34
demand in that industry
 The globalization indices
 The Global Capability Index (GCI) represents the
distribution of assets or personnel in a similar way
to the GRI.
 Companies which rely heavily on external sourcing will
have a low GCI score. This is because the company
cannot deploy (triển khai) resources and capabilities at
will, but relies on external parties to supply the capability.
 This reliance on external parties also means that the
company can face potential problems such as
product/service unavailability, time delays in
delivery, or price pressure from its overseas suppliers.

35
 The globalization indices
 A company low in both GRI and GCI would be a
regional player, a company low in GRI and high
in GCI would be a global operator, a company
low in GCI and high in GRI would be a global
exporter,
 A company high in both dimensions would be
a global player and a company with an average
score in both dimensions would be a regional
dominant global player.

36
Figure 5.5 Mapping of global ambition

37
Figure 5.6 shows the
mapping of two leading
companies, one in the tire
industry and the other in
retailing. Michelin can be
considered as a global
player while Carrefour is
positioned as a dominant
regional player.

Figure 5.6 Comparative mapping of global ambition:

comparison of Carrefour (retailing) and Michelin (tires)

38
 The globalization indices
 None of these indices is perfect.
 The UNCTAD index favors companies from smaller
exporting countries (Switzerland, for instance) to the
detriment (sự thiệt hại) of corporations from large
countries (the USA for instance).
 For their part, the GRI and GCI still assign a global
score to companies that concentrate their
operations in one region or country.
 For instance, a US company having 100% of its sales
in the USA would still obtain a global score, which
would be equivalent to the relative size of the US
presence in the world. 39
Dynamic utilization of the global
indices
 As part of the strategy formulation process,
companies can use the global indices to
analyze their position and set their global
ambition.
 To illustrate, we will take the example of
Whirlpool and the global appliance industry

40
Example 5.2
Whirlpool
 What lessons we can learn from the case of

Whirlpool?

41
Global positioning
 Global positioning consists of two types of
choice:
 First,
the choice of countries in which the
company wants to compete and the role that
those countries play in the global portfolio.
 Second, the definition of the various value
propositions for the products or services of the
company, corresponding to the type of segments
and countries in which the company wants to
compete.

42
Choice of countries
 Depending on the industry, countries differ in
the opportunities they offer to companies for
their strategic development.
 Some countries, given their size, growth or the
quality of their human, natural or locational
resources, are critical for companies’ long-term
competitiveness. Those countries are classed
as key countries.

43
 Choice of countries
 Europe, North America and Asia are the three regional
clusters that a global player would consider, but within
those clusters some countries are more important than
others, and should be given priority.
 In Asia, for instance, in the automotive sector, Japan,
Korea and China can be considered as key.
 In Europe, Germany and, to a certain extent, the UK and
France are key countries.
 In the pulp and paper industry, in which natural resources
are a key component of competitive
advantage, countries like Indonesia can be considered as
key, while California (Silicon Valley) would be key for
44
internet players.
 Choice of countries
 The second category of countries is countries that
exhibit a high growth rate, making them
strategically attractive in the near future. These are
the emerging countries (as defined in Chapter 2).
 Today China, India, Brazil and Poland would
generally qualify for that definition but, again, it is
difficult to generalize since opportunities are
industry-specific.

45
 Choice of countries
 The platform countries constitute a third category.
 These are the countries that, because of locational
advantage, good logistical, financial, regulatory and legal
infrastructure or qualified personnel, can serve as a ‘hub’
for setting up regional centers, that is, global factories that
are ‘platforms’ for further development.
 Singapore, Hong Kong, Ireland and Taiwan are
examples of such countries.
 For example, Carrefour, the French hypermarket giant,
has used Taiwan as a platform for strategic development in
Asia.
46
 Choice of countries
 A fourth category would be marketing countries,
where the market is attractive without being as
strategically critical as the key countries.
 Countries such as Vietnam in Asia, Tunisia in
North Africa or Colombia in Latin America may not
be considered as key or emerging for an
automobile company on industrial or investment
grounds, but may be interesting from the marketing
point of view

47
 Choice of countries
 The type of presence suitable for such countries
should be assessed on its own merits,
depending on the political, economic and
business contexts.
 Countries with a strong resource base but
limited market prospects would be classified as
sourcing countries; for instance, Malaysia for
rubber or Saudi Arabia for petroleum.

48
 Value proposition
 The value proposition is defined by the value
attributes and the market to which the
company seeks to appeal.
 It comprises:
 Choice of value attributes prioritized.
 Choice of customer segments targeted.

 Degree of worldwide standardization adopted for

the product/service offering.

49
Figure 5.8 The three dimensions of the value proposition

50
 Value proposition
 Value attributes are the elements of the
products or services that customers value when
making their purchasing decision.
 These include the product design, functionality,
performance, quality, customization and price,
as well as the related service, brand, availability,
and other features.
 The set of those attributes for a particular group
of customers and a particular product or service
gives the customers’ value curve as illustrated in
Figure 5.9. 51
Figure 5.9 Example of customers’ value curve

52
Value proposition
 Professor Michael Porter of Harvard Business
School has identified two ‘generic’ strategies
corresponding to two types of value attributes:
A proposition based on value-enhancing
attributes such as performance, quality, service
and customization. Porter calls this a
differentiated attribute.
 A proposition based on price for standardized
products or services. Porter calls this cost
leadership

53
Value proposition
 The same typology (các kiểu hình) can apply to global
positioning: the company can either position itself as a
global differentiator or a global cost leader.
 Customer segments are groups of customers that
have similar value curves. Those customer groups
can be identified by income level, geographical
location, age and lifestyle attributes for consumer
goods and service industries; or by industry, size and
purchasing behavior for business-to-business (B2B)
industries.

54
Table 5.3 Global positioning alternatives

55
 Global business system
Global business system and its components
 A business system is the configuration (cấu hình/

cấu thành) of the various activities that a firm carries

out (either internally or externally through alliances) in
order to design, produce and deliver value to
customers, and ultimately to capture value for itself.
 Professor Porter describes a company business system

as a ‘value chain’.

56
 Global business system
 Three major components of a value chain:
 Innovative activities: R&D, knowledge creation,
design.
 Productive activities: procurement,
manufacturing, back office, operations, logistics.
 Customer relationship activities: marketing,
sales, distribution, customer services.

57
Figure 5.10 Generic value chain
58
Figure 5.11 Typical globalization of the value chain 59
 Global business system
 During the process of globalization, companies split
their value chain by spreading their activities across
the world. The typical path of globalization of the value
chain is described in Figure 5.11.
 The first stage is the export stage in which the only
element of the value chain to be set up in foreign
countries is sales, through local distributors,
agents or licensing.

60
 Global business system
 The only direct investment at this stage is, if the size
of the market justifies it, the creation of a
representative office for one country or region.
 Those representative offices are set up to seize
opportunities, identify agents, distributors and
partners, organize trade flow and prepare the way
for future substantial investments.

61
 Global business system
 The second stage is to actively invest in marketing
subsidiaries to manage the marketing mix.

62
 Global business system
 During the final stage of globalization, multinational
companies integrate and coordinate their worldwide
operations to take advantage of economies of scale,
transfer of know-how and resource optimization.
 This leads to an interlocking set of value chain activities
which falls broadly into three categories:
 The activities which have a global role to serve the
whole world (global activities, such as global research
centers, or global plants)
 Those which have a regional role (regional activities)

 Those which are purely local (local activities)

63
Figure 5.12 A generic global distribution of activities in
the value chain
64
 Competitive advantages
 Competitive advantages are capabilities that are
difficult to replicate or imitate and are non-tradable.
 Traditionally, there were seen to be two types of
capability that lead to competitive advantage (Porter
1985):
 Capabilities leading to an increase in customer value
through performance, quality and brand services: a
differentiated value proposition
 Capabilities leading to a lower cost base, such as
low-cost labor, low-cost sourcing, economies of scale
in production, efficiency: a cost leadership value
proposition.
65
 Competitive advantages
 More recently, three other types of competitive
advantage have been identified:
 Capabilities that allow companies to be ahead of the
competition in developing new products or services,
leading to an innovative advantage.
 Capabilities that allow companies to be faster in
adapting to change and delivering value to
customers, leading to a time-based advantage.
 Adopting a ‘blue ocean strategy’ – that is, by-
passing the existing competition and creating a new
market space.

66
 Competitive advantages
 Blue ocean strategy is based on four principles:
 Eliminating those elements of the value curve that are
not necessary
 Reducing some elements that are less important

 Augmenting those elements that need more

emphasis
 Creating new elements as needed

67
Table 5.4 Capabilities leading to competitive advantage
68
Example 5.3
Yellow Tail: a blue ocean strategy in action in
the global market space

69
Sources of competitive advantages

 Those competitive advantages find their

sources in the proprietary (độc quyền)
ownership of, or access to, valuable
resources, assets or competencies, as
shown in Figure 5.13.

70
Figure 5.13 Sources of competitive advantage
71
Sustainability of competitive advantage

 Competitive advantage, in order to be

valuable, needs to be long-lasting.
 From an economic point of view, a competitive
advantage is similar to a monopoly that the
company creates for itself and which gives the
company a profit advantage over its
competitors.
 This happens only if this monopoly is not
immediately neutralized by imitation.

72
Sustainability of competitive advantage

 There are four ways of achieving sustainability:

 Customer loyalty due to a strong brand or a unique
customer value.
 Positive feedback due to accumulated experience
or network effects.
 Preemption (quyền mua trước) of key resources
such as location, key personnel, distribution
networks, patents and so on.
 Imitation barriers such as inimitable competencies
or costly capabilities to copy or replicate

73
Global firms’ competitive advantages

 For global firms, the central issue is to be able to

utilize their existing advantages in multiple-country
leverages in order to compete successfully with local
players and other global competitors. This can be
done in two ways:
 By being among the first competitors to enter a
given market: first-mover advantages
 By exploiting capabilities already built up in other
countries in order to displace and dominate
existing competitors: leveraging advantages

74
Table 5.5 Sources of competitive advantage of global companies
75
Table 5.5 Sources of competitive advantage of global companies

76
 Global, regional, multinational deployment of
competitive advantages

 One particular aspect of leveraging competitive

advantage in a global setting is related to the way in
which a company will distribute and organize its
capabilities. From that point of view, three types of
configuration can be identified:
 Global configuration: the world is considered as a
single market, therefore products will be standardized
across the globe and organization will be centralized

77
 Global, regional, multinational deployment of
competitive advantages

 Regional configuration: the competitive approach will

be differentiated according to regional
characteristics and the organizational structure will be
designed around regions.
 Multinational configuration: the world is a collection
of different countries, and competitive strategies
will be adapted to the different environment.

78
Global organization
 The final element of a global strategy is the design of
an organizational architecture which is able to
support and implement the global ambition, global
positioning and global business system already
described.

79
Table 5.7 Organizational designs for global strategies
80
Table 5.7 Organizational designs for global strategies 81
 The choice of an adequate organizational model is
contingent upon the following factors:
 The nature of the competitive context in the
industry. The more ‘global’ the industry, the more
integrated and coordinated the activities and the
more the organizational structure
should reflect this integration.
 The strategic positioning adopted by the firm. A
standardized positioning using cost leadership as a
competitive advantage will require a tightly
integrated organization such as the centralized hub
or the global business structure.
82
 Global strategies and the small and medium-sized
enterprise (SME)

 Small and medium-sized enterprises (SMEs) represent

a significant proportion of employment activities in the
world (Table 5.8).
 Their participation in international trade and
investment remains relatively limited; their main global
activities are sourcing and exporting.
 According to an estimate made by the European
Commission in 2010, 25% of European SMEs are
engaged in exports, 29% in imports, 2% in
foreign direct investments and 7% in technological
partnerships.

83
Table 5.8 SMEs’ economic weight measured by contribution to
employment in selected countries in Europe, North America, Asia
Pacific and Australia
84
 Global strategies and the small and medium-sized
enterprise (SME)

 Does the framework presented here apply to SMEs as

well as large multinational and global enterprises?
 The answer to that question is ‘yes and no’.
 ‘No’, because of SMEs’ limited resource base; they are
not generally able to create global capabilities by
deploying assets, resources and competencies in the
20–30 countries that represent 90% of world demand.
 ‘Yes’, because these companies also need to ‘think
global’ if they are competing in sectors that are
confronted with global competition and if new market
opportunities are located outside their national
boundaries.
85
Barriers to internationalization for
SMES
 Table 5.10 provides a list of the barriers to
internationalization for SMEs.
 As Table 5.10 shows, those barriers belong to two
categories:
 Financial issues

 Ability to deal with a foreign environment

86
Table 5.10 Obstacles to internationalization as perceived by SMEs

87
Overcoming the barriers
 Two major sources of intervention may help
SMEs to overcome the barriers to
internationalization:
 Government-led initiatives

 Company-led initiatives

88
Overcoming the barriers
 Government-led initiatives. Many governments or
international organizations, being conscious of the
difficulties that many SMEs face, have tried to
implement specific programs. In 1997 the OECD
grouped government support initiatives into four
categories: financial help programs, business
environment facilitators, capability-enhancement
programs, and assistance in information
gathering.

89
Overcoming the barriers
 The following approaches are the kind of actions that
governments can implement in order to foster the
global capabilities of SMEs.
 Information gathering and distribution

 Advice and consulting

 Trade fairs

 Training

 Financing

 Logistical and market access support

90
 Born global
 There are many definitions of ‘born global’.
 The earlier proponents of the concept defined born
global firms as ‘firms that intended to export
immediately upon inception’, or firms that ‘succeed in
world markets without an established domestic
base’, thus concentrating on the early exporting drive of
those companies.
 The concept has since evolved to include ‘business
organizations that, from inception, seek to derive
significant competitive advantage from the use of
resources and the sale of outputs in multiple
countries’.
91
 Born global
 Characteristics of born global firms:
 A small domestic market inciting entrepreneurs to find a
larger market for starting a new venture.
 The presence of multinational customers (a
piggybacking perspective).
 The emergence of global niches markets particularly in
the technology intensive sectors.
 The firm’s products or services have significant first-
mover advantages or network effects.

92
 Born global
 Characteristics of born global firms:
 Born global firms offer high value-added products or
services – technology start-ups in particular tend
to quickly find partners, distributors and sometimes
production or service in foreign markets.
 Internationally experienced and highly motivated
company leaders.
 Strong capabilities in building partnerships.

93
Example 5.4
 Gemplus: from Marseille to the world

94
Example 5.5
 Sunna Design: a born global start-up

95
Example 5.6
 Cochlear: an Australian born global high-tech
company

96
Mini-case 5.1
 HSBC: The world’s local bank
 Questions
 The bank defines its businesses as ‘global’. What
is your opinion of this definition? Are all the
businesses really global? What are the
implications for decision making?
 What is your assessment of HSBC’s strategy of
focusing on trade corridors?

97