global strategy context chapter 10

Strategy – Process, Content, Context The International ContextDe Wit & Meyer

CHAPTER

10

STRATEGYProcess, Content, Context

Chapter 10

The International Context


CHAPTER

10Agenda

I. The Issue of International Configuration Dimensions of Globalization Levels of Globalization International Composition International Management

II. The Paradox of Globalization and Localization The Demand for Global Synergy The Demand for Local Responsiveness

III. Perspectives on the International Context The Global Convergence perspective The International Diversity Perspective

IV. The Debate and Readings


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10I. International ConfigurationInternational Composition and International Management

The Issue of International ConfigurationHow should the firm organize its activities across borders?

International CompositionIn which countries does a company want to be active

in and how much involved do they want to be?

International ManagementHow should a company organize itself in order to deal

with its border-spanning nature?

Dimension of GlobalizationWhat is global?

Levels of GlobalizationWhat is the subject of globalization?

Which countries are selected to do business in?

International Scope

How are the value adding activities

distributed across the selected countries?

International distribution

1. Standardization2. Coordination3. Centralization

Three Integration Mechanisms


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10Dimensions of GlobalizationVarious Elements

Worldwide scope

Spatial dimension: ‘Global’ used as a geographic term.

Worldwide similarity

Variance dimension: ‘Global’ used as a term to refer to homogeneity around the world.

Worldwide integration

Linkages dimension: ‘Global’ used as a term to refer to the world as one tightly linked system.


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10Dimensions of GlobalizationInternationalization and Globalization of the Firm


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10Levels of GlobalizationMacro, Meso and Micro Level

Globalization of Economies

Macro level: Are the world’s economies in general experiencing a convergence trend?

Globalization of Businesses

Meso level: Are customer demands similar around the world? Do producers compete with one another on a global scale?

Globalization of Companies

Micro level: Do individual firms compete with one another on a global scale?


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10International CompositionInternational Growth Options


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10International CompositionInternational Scope and Distribution

In which countries does a company want to be active in and how involved is it?

Geographic spectrum: In how many countries does the company want to

be active in, and which countries should these be?

International ScopeDistribution of value adding

activities: How can resources and activities best be divided across the

various countries?

International distribution

International Composition


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10International CompositionExample of Foreign Sales Market Portfolio


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10International ManagementIntegration Mechanisms

CentralizationIntegrating activities at one central location in order to gain economies of scale or using the competitive advantage of a particular country

CoordinationAligning activities in different countries in order to serve border-crossing clients or to respond or attack competitors

StandardizationEqualizing activities in each country, in order to achieve economies of scale or to serve border crossing customers


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10International ManagementGeneric Organizational Models for International Firms

Barlett and Ghoshal, 1995


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10International ManagementCharacteristics of Generic Organizational Models

Organized along geographic lines Subsidiaries are self-sufficient (autonomous) Level of standardization is low Multinational

Decentralized Federation Organized along geographic lines Close HQ-subsidiary relationship Core competences are developed

centrally International

Coordinated Federation

National units relatively unimportant Level of standardization/ centralization is high Coordination is directed by HQ Global

Centralized Hub Close HQ-subsidiary relationships Close subsidiary-subsidiary

relationships Low level of centralization Transnational

Integrated Network


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10II. Globalization and LocalizationDealing with the Paradox

Local Responsiveness

The ability to remain attuned to specific national

market demands, responding adequately and

timely to unique characteristics

GlobalSynergy

The ability to create value by leveraging resources, integrating activities and aligning product offerings

across two or more countries


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10Global SynergyForms of Cross-Border Synergies


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10Global SynergySources of Cross-Border Synergies

I. Achieving resource reallocation

II. Achieving resource replication

IV. Reaping location advantages

III. Reaping scale advantages

V. Dealing with cross-border customers

VI. Dealing with cross-border competition

AligningPositions

LeveragingResources

IntegratingActivities


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10Local ResponsivenessMost Important Differences between Countries

Government Regulations

Customer Needs

Buying Behavior

Substitutes

Distribution Channel

Media Structure

Infrastructure

Supply Structure

Market Structure


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10III. Overview of the PerspectivesGlobal Convergence vs. International Diversity

INTERNATIONAL DIVERSITY PERSPECTIVE

Localization over globalization

Fostering international diversity

Cultivating fragmentation of international linkages

Cultural and institutional identity

Diversity is reality; divergence can be exploited

Local responsiveness focus

Adapt/decentralize unless

Locally leveraged innovation

Transnational structure (integrated network)

GLOBAL CONVERGENCE PERSPECTIVE

Globalization over localization

Growing international similarity

Growing integration of international linkages

Technology and communication

Diversity is costly; convergence can be encouraged

Global synergy focus

Standardize/centralize unless

Center-for-global innovation

Global structure(centralized hub)

global strategy context chapter 10

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