Global Strategy

Global Strategy
Strategy:
the action managers take to attain the
goals of a firm
General purpose: maximize/make profit
Differentiate products, increase price: add
value, features, quality, service
Achieve low cost
Key means: allocation of scarce resources to
attain goals
Activity Value Chain
Firm as a chain of discrete value creating
activities
Primary
upstream activities, manufacturing
downstream activities: marketing, sales, after
sales service
Support
infrastructure (general and administrative)
human resources
research and development
Global Expansion Benefits
Earn greater return from distinctive skills, core competences
Inimitable or difficult to imitate skills in value chain
Realize location economies
Choice of FDI location
Create multinational network of activities (global web)
Realize greater experience curve economies, which reduce the cost of
value creation
Learning effects, economies of scale
B
Accumulated output
Experience curve
Unit costs
A
Pressures for Global Integration
& Local Responsiveness
High
High
Low
Low
Cost Reduction
(Global Integration)
Pressures
Local
Responsiveness
Pressures
Differences in
- consumer tastes/preferences
- infrastructure/practices
- distribution channels
- host government needs/requirements
Ball bearings,
wheat
Cosmetics, food,
household goods
Strategic Choice
High
High
Low
Low
Local Responsiveness Pressures
Global
Strategy
Transnational
Strategy
Multidomestic
Strategy
International
Strategy
Cost Reduction
(Global Integration)
Pressures
Multidomestic MNC
Decentralized Federation - Many key assets, responsibilities
and decisions localized
Personal Control - Informal HQ-Sub relationship, simple financial controls
Multidomestic Mentality - Management sees overseas operations as
portfolio of independent businesses
UK
Chile
India
Japan
USA
HK
Mexico
International MNC
Coordinated Federation - Key assets, responsibilities decisions localized
Administrative Control - Centralized HQ control, formal planning and
control, tight HQ-Sub linkage
International Mentality - Management sees overseas operations as
appendages to a domestic operation
UK
Chile
India
Japan
USA
HK
Mexico
Global MNC
UK
Chile
India
Japan
USA
Centralized Hub - Most strategic assets, resources, responsibilities
and decisions centralized
Operational Control - Tight HQ control of decisions, resources, information
Global Mentality - Management sees overseas operations as delivery
pipelines to a unified global market
HK
Mexico
Transnational MNC
UK Chile
India
Japan
USA
Networked Organization - Distributed, specialized resources and capabilities
Interdependent Units - large flows of components, products, resources,
people, and information
Transnational Mentality - Complex process of coordination and
cooperation in an environment of shared decision making
HK
Mexico
International Strategic Alliances
Cooperative agreements between competitors from
different countries
Advantages
Facilitate entry into a foreign country
Allow fixed costs of new products and processes to be shared
Bring together complementary skills and assets
Help establish industry standards in technology
Allow reduction of operating costs,e.g., shared training,
purchasing
Disadvantages
Give competitors a low cost route to new technology / markets
Disproportional benefit accrual to partners
Making alliances work which partner?
A suitable partner
Helps achieve strategic goals
Adds needed, valuable capabilities
Shares the firms vision for purpose of the alliance
Is not likely to exploit the alliance to its own ends
Steps to select a partner
Thorough background check via public sources
Advice from third parties who have personal
experience with likely partner(s)
A lot of face-to-face time with likely partner(s) in
their environment
Making alliances work - What Structure?
Protect technology/know-how that is not
intended to be transferred
Draw a solid contract with safeguards against
opportunism
Achieve equitable gain through agreed swaps
of technology the other wants
Seek creditable, clearly articulated
commitment to partner behavior a-priori
Making alliances work - How to manage?
Show sensitivity to cultural differences that
explain different managerial styles
Build trust
Set up framework for formal and informal face-
to-face meetings to create a common value system
Build informal network of personal relationships
Learn from partners
Apply the knowledge within your own
organization
Brief your employees on partner strengths