chapter 11 global strategy 11 - 3 mcgraw-hill/irwin global business today, 4/e © 2006 the...
TRANSCRIPT
11 - 3
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
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
11 - 4
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
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
11 - 5
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
11 - 6
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
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 curveUnit costs
A
11 - 7
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Pressures for Global Integration
& Local ResponsivenessHigh
HighLowLow
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
11 - 8
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Strategic Choice
High
HighLow
Low
Local Responsiveness Pressures
“Global”Strategy
“Transnational”Strategy
“Multidomestic”Strategy
“International”Strategy
Cost Reduction(Global Integration)
Pressures
11 - 9
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Multidomestic MNC
Decentralized Federation - Many key assets, responsibilities and decisions localized
Personal Control - Informal HQ-Sub relationship, simple financial controlsMultidomestic Mentality - Management sees overseas operations as
portfolio of independent businesses
UK Chile
IndiaJapan
USA
HK
Mexico
From: Bartlett and Ghoshal, Managing across borders, 1989
11 - 10
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
International MNC
Coordinated Federation - Key assets, responsibilities decisions localizedAdministrative Control - Centralized HQ control, formal planning and
control, tight HQ-Sub linkageInternational Mentality - Management sees overseas operations as
appendages to a domestic operation
UK Chile
IndiaJapan
USA
HK
Mexico
From: Bartlett and Ghoshal, Managing across borders, 1989
11 - 11
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Global MNC
UK Chile
IndiaJapan
USA
Centralized Hub - Most strategic assets, resources, responsibilities and decisions centralized
Operational Control - Tight HQ control of decisions, resources, informationGlobal Mentality - Management sees overseas operations as delivery
pipelines to a unified global market
HK
Mexico
From: Bartlett and Ghoshal, Managing across borders, 1989
11 - 12
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Transnational MNC
UK Chile
IndiaJapan
USA
Networked Organization - Distributed, specialized resources and capabilitiesInterdependent Units - large flows of components, products, resources,
people, and informationTransnational Mentality - Complex process of coordination and
cooperation in an environment of shared decision making
HK
Mexico
From: Bartlett and Ghoshal, Managing across borders, 1989
11 - 13
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
11 - 14
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
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
11 - 15
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Making alliances workWhich partner?
• A suitable partner- Helps achieve strategic goals
• Adds needed, valuable capabilities - Shares the firm’s 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
11 - 16
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Making alliances workWhat 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
11 - 17
McGraw-Hill/IrwinGlobal Business Today, 4/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Making alliances workHow 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