Chapter 1-BPS4305

Chapter 1
Strategizing
Around the
Globe
Global
Global Strategy
Strategy
Mike W. Peng
Mike W. Peng
Copyright
Copyright ©
© 2014
2014 Cengage
Cengage Learning.
Learning. All
All Rights
Rights Reserved.
Reserved. May
May not
not be
be scanned,
scanned, copied
copied or
or duplicated,
duplicated, or
or posted
posted to
to aa publicly
publicly accessible
accessible website,
website, in
in whole
whole or
or in
in part.
part.
Outline
• A global global-strategy book
• Why study global strategy?
• What is strategy?
• Fundamental questions in strategy
• What is global strategy?
• What is globalization?
• Global strategy and globalization at a
crossroads
Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Quiz
•Which of the following two cities has a larger
number of Fortune Global 500 company
headquarters?
• Beijing
• New York
•Fortune Global 500 HQ (2011 data from Fortune, July 23, 2012)
•Beijing (43 out of 73 from China)
•New York (18 NYC + 3 NYS out of 132 from the US)
•FYI: Texas 13 (Houston 6, DFW 4, San Antonio 1,
Austin/Round Rock 1); Shanghai 6
Global Strategy: One Size Fits All?
• Traditional “global strategy” is treating different

countries as one worldwide or “global” market.
 World car: Ford Contour (as the Mondeo in Europe)
 World drink: Coke Classic?
 World advertising commercial: Polar bear ads
• But that strategy has backfired repeatedly
 There is no world car, no world drink, no world MTV
• A more balanced view—covering both global and
local (non-global) aspects—is necessary
1–4
© M. W. Peng (www.mikepeng.com)
A Global Global-Strategy Book
• Text departs from traditional view of global
strategy
• Important to respond to local needs
• Traditional view of global strategy is incomplete
and unbalanced
 Sacrifices local responsiveness and global learning
 Ignores how domestic firms compete with each other
and with foreign entrants
 Traditional global strategy is only appropriate for
large MNEs in developed countries
 It is dangerous to ignore less developed economies
Why Study Global Strategy?
• Job and career aspiration opportunities
Expertise in global strategy is highly sought after
• Awareness of what is going on in the world

 Preparation for international assignments
• Avoid downside risks of globalization

 Necessary knowledge for people working in smaller companies
© 2010 Cengage Learning.
All rights reserved.
7
What is Strategy?
• Origin-Greek word (strategos)-art of the general
 Sun Tzu, Chinese military strategist in 500 B.C.
 Modern-day application to business and competition dates to the
1960s
• Plan versus Action - strategy is “explicit, rigorous formal
planning” versus “a set of flexible, goal-oriented actions”
• Strategy as Theory-how to compete successfully
 Firms have both intended and emergent strategies
 One firm’s strategies may not work in all situations
 Past success does not guarantee future success
 It is often difficult to change strategy
What is Strategy? Cont’d
 Strategy should give coherence to decisions and
actions
 Managers must exert effective strategic leadership
The Essence of Strategy
Copyright © 2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly Figure 1.3
accessible website, in whole or in part.
Our definition: Strategy as theory
• Integrating both planning and action schools
• Leveraging the concept of “theory”
 A theory serves two purposes: Explanation and
prediction
• Requiring replications and experimentations
 To establish the temporal (time-related) and
geographic limits of an existing theory
• Understanding the difficulty of strategic change
Fundamental Questions in Strategy
• Why do firms differ?

 Cultural differences between Western firms and Japanese
companies
 Networks of relationships have powerful effect - keiretsu,
guanxi, chaebol, blat
• How do firms behave?
 Industry-based view - focus on competitive forces within an
industry that impact all firms
 Resource-based (capabilities) view - focus on internal strengths
and weaknesses, firm specific resources and capabilities
 Institution-based view - focus on government and societal forces
Why Do Firms Differ?
• Western firms (US/UK vs. German/French)
 Have different (shorter- versus longer-term) planning
horizons.
• Japanese firms
 Are different from Western firms.
• Firms from emerging economies (Brazil, Russia,
India, and China—BRIC)
 EM 1.1. Foxconn
• The challenge is to understand the roots of these
differences when trying to compete globally.
1–13
Fundamental Questions in Strategy cont’d
• What determines the scope of the firm?
• What determines the international success or
failure of firms?
 Industry-based view - degree of competitiveness in
the industry
 Resource-based view - firm specific differences in
capabilities
 Institution-based view - institutional forces, such as
economic reforms and government policy
The “Strategy Tripod”
Three Leading Perspectives on Strategy
Copyright © 2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly Figure 1.4
accessible website, in whole or in part.
What Is Global Strategy?
• Provide standardized products and/or services
on a worldwide basis (i.e., traditional view)
• Any strategy outside one’s home country
• Our definition of global strategy:
 Strategies of firms around the globe
 Both international and non-international (domestic)
 Both developed and emerging economies
How About Global Strategy?
• Traditional “global strategy”
 Only relevant for MNEs from developed economies
• The same as “international” (non-U.S.) strategy
 Wal-Mart went to Mexico in 1991: Did it go “global”?
 Everything becomes “global”?
• Our definition of global strategy:
 Strategy of firms around the globe
 Both international and non-international (domestic)
 Both developed and emerging economies
1–17
What is Globalization?
• A new phenomenon since the late 20th century?
• A part of long-run human history?
• A pendulum view: Transportation and
communication revolutions + breakdown of
artificial barriers in trade and investment
 A process similar to the swing of a pendulum:
Postwar history
 Semiglobalization?
Global Strategy and Globalization at a
Crossroads
• Three Defining Events - have brought corporate
social responsibility, ethics, and governance to
the forefront of strategic decisions
 Anti-globalization protests - lost jobs, downward
pressure on wages for unskilled labor, environmental
destruction
 Terrorist attacks
 Corporate governance crisis (Asian financial crisis,
U.S. scandals)
Global Strategy and Globalization at a
Crossroads, Cont’d.
•Know Yourself, Know Your Opponents
 Understand strengths AND limitations
 Recognize the social, political, and environmental
costs associated with globalization
 Current business school students exhibit values and
beliefs different from the general public
 Be aware of bias and strategic blind spots
 Do not ignore non-government organizations (NGOs)-
view them as partners
What Determines the Success or Failure of
Firms around the Globe?
• Acquiring and leveraging competitive advantage

• Strategy is about performance, about making a
difference
• The Key: Sustaining such an advantage over
time and across countries (regions) through
replication and innovation.
1–21
Organization of the Book
• Part I: Foundations of Global Strategy
 Chapter 1: Strategizing Around the Globe
 Chapter 2: Managing Industry Competition
 Chapter 3: Leveraging Resources and Capabilities
 Chapter 4: Emphasizing Institutions, Cultures, and Ethics
• Part II: Business-Level Strategies
 Chapter 5: Growing and Internationalizing the Entrepreneurial Firm
 Chapter 6: Entering Foreign Markets
 Chapter 7: Making Strategic Alliances and Networks Work
 Chapter 8: Managing Global Competitive Dynamics
• Part III: Corporate-Level Strategies
 Chapter 9: Diversifying, Acquiring, and Restructuring
 Chapter 10: Strategizing, Structuring, and Learning Around the World
 Chapter 11: Governing the Corporation Around the World
 Chapter 12: Strategizing with Corporate Social Responsibility

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Chapter 1

• Traditional “global strategy” is treating different

• Awareness of what is going on in the world

• Avoid downside risks of globalization

Copyright © 2014 Cengage Learning. All Rights Reserved. May not

• Why do firms differ?

Copyright © 2014 Cengage Learning. All Rights Reserved. May not

• Acquiring and leveraging competitive advantage

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