I Introduction

 The term international, multinational,

transnational, and global business are often
used interchangeably.
 It is important to define and distinguish
between them in order to avoid serious
confusion.
 A spectrum of international business activity
can be identified depending on the nature and
extend of a business’s involvement in
international markets and the degree of co-
ordination and integration of geographically
dispersed operation.
 International Business: An organization is
operating in more than one country. It is a
generic term.
 Multinational Business: Conduct international
business; in addition, it implies some
decentralization of strategy and management
decision making to overseas subsidiaries, with
little co-ordination of activities and
subsidiaries across national boundaries.
Subsidiaries own considerable autonomy in
terms of their strategies, largely determined by
local condition.
 Global Business: Conduct activities in a large
range of countries across the world with a single
strategy that is highly co-ordination and
integrated throughout the world.
Company strategy is determined centrally and
subsidiaries have little autonomy in their operation.
 Transnational Business: Conduct activities across
boundaries with varying degrees of co-ordination,
integration and local differentiation of strategy and
operations, depending on market and business
conditions.
 Four Basic Strategies
High
Global Transnational
Strategy Strategy

Cost
pressures
International Multinational
Strategy Strategy
Low

Low High
Pressures for local responsiveness

Figure 12.5
 Definition of Globalization
 In general term, globalization refers to the
development of global or worldwide
business activities, competition and
markets and the increasing global
interdependence of national economies.

 Globalization of economies: Increasing

interdependence between national
economies throughout the world.
 Globalization of markets: Increasing homo
genization of consumer tastes and product pre
ferences in certain markets.
 Globalization of industries: Increasing glob
alization of the productive process, with firms
choosing to concentrate or disperse value-add
ing activities around the world according to th
e locational advantages to be obtained
 Globalization of strategy: the extend to whi
ch an international business configures and c
o-ordinates its strategy globally.
 Which factors can be attributed to
recent developments of globalization?
 Manufacturing technology

 Transportation technology

 Information and communications

technology
 Trade liberation (GATT and WTO)

 Rising real term incomes

 Globalization consists of two main components:
The globalization of markets and the
globalization of production.
 The globalization of markets refers to merging
distinct and separate national markets into one
huge global marketplace. A global strategy
must be based on standardization of product,
branding, and advertising.
 The globalization of production means that firms
distribute their production processes to different
locations around the globe in order to take
advantage of regional differences in the cost
and quality of the production factors
 Is globalization a blessing or curse?
The Blessing The curses
 Consumers have access to  The already impoverished countries a
a much wider range of re becoming even poorer.
products and at relatively  Employ child labor, condoning inhu
low prices. man working conditions and paying s
lave wages in developing countries
 Increased global trade has
 There have been huge job loses amon
made people wealthier g unskilled workers in developed cou
 Companies benefit from ntries.
low cost production in  Bring threats to the national cultures
developing countries and identities alike.
 Developing countries  Huge international companies have t
benefit from increasing he greater economic power than the g
employment and wage overnment of the developing countrie
levels s where they are operating.
 Damage the ecological environment.
 Globalization cannot be prevented but can be
managed by governments, international
bodies and global businesses to raise living
standards for all.
 The reduction of poverty is not simply a
social and moral issue it is also economic and
political.
 Transnational Businesses can gain reputation
and productivities by investing and setting
standards in poor countries.
 Developed countries “aid” the poorer nations.
Prescriptive or Deliberate Approach to Strategy
 Focus on long-term planning aimed at
achieving a fit between an organization’s
strategy and its environment.
 Advantage: It structures complex
information, defines and focuses business
objectives, establishes controls, and sets
targets that performance can be measured.
 Disadvantage: It is overly prescriptive
because the business environment can be
very chaotic and complex.
Emergent or Learning Approach to Strategy

 The complexity and dynamism of modern

business organizations and their environments
suggest that strategy will emerge and evolve
incrementally over time.

 Strategy evolves rationally in response to

changes in the environment.
Competitive positioning approach to strategy

 Begins with analysis of the competitive

environment using the five-forces framework.
 Followed by value chain analysis, which
examines the value-adding activities of the
organization and the linkages between them.
 Finally, select a generic strategy, supported by
the appropriate configuration of value-adding
activities.
 It is termed outside-in.
 Criticisms
 It is prescriptive and static.
 Differences in industry profitability do not
necessarily determine the profitability of
the organizations within them.
 It highlights (and presupposes)
competition rather than collaboration.
 It emphasizes the environment rather than
the competences of the corporation.
 Resource, Competence and Capability
Approach to Strategy
 Emphasized how to manage resource
inputs in developing core competences and
distinctive capabilities.
 It is termed inside-out.
 It also emphasizes the potential advantages
of collaboration between organizations
whose competences are mutually
complementary.
 Criticisms

It suffers from a lack of well-

developed analytical frameworks.

It tends to overlook and even neglect

the importance of the competitive
environment
Knowledge-Based Approach to Strategy
 Knowledge is viewed as being the only sustainable
source of competitive advantage.
 Knowledge can be categorized as:
 Know-how (practical Knowledge)
 Know-why (theoretical Knowledge)
 Know-what (strategic Knowledge)

 Organizations must seek to create new knowledge

that is grounded in organizational learning and that
underpins core competences and value-adding
activities, through which competitive advantage is
achieved.
The Approach to Global Strategy
1. Competitive advantage arises from
new and superior knowledge.
2. Organizational learning and
knowledge management are vital to
creating and sustaining competitive
advantage.
3. Strategy is both planned and
emergent.
4. It is important to distinguish between
industries and markets.
The Approach to Global Strategy
5. Competitive advantage results from
both internal knowledge-based core
competence development and from
changing conditions in the business
environment.

6. Competitive advantage results from

both competitive and collaborative
behavior.
 The global strategic management proces
s is both “inside-out” and “outside-in” as
strategy is inevitably shaped by both the
environment and by the resources, comp
etences and capabilities of the organizati
on.
 Hence, the process forms a matrix; in ot
her words, there are two dimensions, int
ernal and external environments, to cons
truct the global strategy.
 Major Elements in the Process Matrix
 Globalization and the need for a global
mission (or version) and objectives.
 Organization learning  Analysis of global
resources, competences and value-adding
activities.
 Organization learning  Analysis of the
global business environment.
 Developing knowledge-based global and
transnational competences and strategies.