WORLDWIDE WORLDWIDE COMPETITORSCOMPETITORS

88

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WorldwideWorldwide

Internationalregional

International market entry and

development

Restricted national market scope

Internationalisation Retrenchment

Phase 1 Phase 2 Phase 3 Phase 4

Figure 8.1. The phase model and worldwide strategies

Restricted national market scope

International market entry and development

International regional

Worldwide competitor

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““Think globally and act locally”Think globally and act locally”

Balance between • responsive and and flexible local approach

• effective global co-ordination

No company achieved satisfactory solution!• few: flexible local and central mgnt capabilities

• attempted link them

Globalisation:Globalisation:• problematic strategic spatial imperatives

• practical implementation challenges

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Demand:Demand:

FUNDAMENTAL CHANGE IN FUNDAMENTAL CHANGE IN INTERNATIONAL BUSINESS INTERNATIONAL BUSINESS

PRACTICEPRACTICEAutonomy - integration

Organizational learning

Knowledge transfer

Global ≠ multi-local

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Dimensions tayloring organization:

PProductroduct – – geography geography - - people/procespeople/proces

• organizational complexity • how to develop global vision • differing organizational structures (US, EU, Japan)• consider: relative strengths + weaknesses of

competitors• resource interdependencies among units

How to integrate into transnational organization to exploit global

competition advantage?

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OUR FOCUS:

1. 1. DDeveloping a global strategyeveloping a global strategy

2. 2. GGlobal strategy assessment and lobal strategy assessment and competitive movescompetitive moves

3. 3. IInternational strategic alliancesnternational strategic alliances

4. 4. OOrganizational forms for worldwide rganizational forms for worldwide competitorscompetitors

5. 5. RReconciling the irreconcilable: the econciling the irreconcilable: the search for the transnational companysearch for the transnational company

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1.1. Developing a global strategyDeveloping a global strategy““Global chess”Global chess”

• advantage of lowest nat’l factor cost• tailoring organization along three

dimensionproduct

geography

people/process

• examine carefullyorganizational structure

systems

value

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ProductProduct GeographyGeographyPeople and People and processesprocesses

Global Global strategystrategy

Configure product/ Configure product/ service operations in service operations in

order to:order to:

(a) supply chosen market segments

(b) achieve economies of scale

(c) avoid unnecessary duplication of resources

Achieve geographical Achieve geographical coverage to encompass coverage to encompass strategically important strategically important

countriescountries

Determined by:Determined by:(a) current and future

sales potential

(b) the need to match competitors

(c) have access to low factor costs and/or expertise

Develop people and Develop people and process in order to:process in order to:

(a) achieve a global vision/mindset

(b) leverage cross-unit skills and competences worldwide

(c) ensure strong coordinating and linking mechanisms between organisational sub-units

Figure 8.2 Developing and/or reshaping the worldwide competitor

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EnvironmentEnvironment (external triggers)

• more open trading environment• falling transport cost (containers, large

carriers, deregulation)• new technologies require global scale• converging customer preferences

(communication)• customized core products - global scale

efficiency - flexible manufacturing systems

• growth of global customers

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Capture competitive advantages:Capture competitive advantages:

• visionvision– visionary leader (anticipate/shape future)– catalyst : change existing mindset => world

mindset needed– realization: 5 components required

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Widely shared

INTERNATIONAL INTERNATIONAL

VISION/MINDSETVISION/MINDSET

Time Business anywhere

Leverage Insiderisation

Figure 8.3 The world vision/mindset

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Widely sharedWidely shared: clearly articulated

foster cohesiveness what to do, how to do the business

Business anywhereBusiness anywhere: transparent to needs of local customers

(communication+logistic network)Insideration:Insideration:

respond to local needs (no replication of domestic organizational systems)

LeverageLeverage: fundamental organizational innovation => replace old

mindsetcreating a system of shared value: 1 + 1 = 3

Time:Time: building shared values takes time => establish

priorities, monitoring (BSC)

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Established mindsetEstablished mindset

• Deeply embedded, difficoulkt to change

• It makes the need to change periodically

• If no longer appropriate: organizational risk

• Firm need to seek constant renewal

““a journey without destination”a journey without destination”

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2. Global strategic assessment and 2. Global strategic assessment and competitive movescompetitive moves

RivalsRivals current position, likely competitive moves» analyze competitive

strength

» possible strategic options

Questions to identify competitors’ position:

Product: •Market segments: narrow/broad focus?•Economies of scale: nat’l-worldwide?•Where is necessary to contrentrate to reach economies of scale? (R&D, production)

Geography:•Cover important markets?•Match rivals market coverage?•Access to low factor cost, skill, expertise, locations?

People, processes:•Who operates with global vision? agressively?•Leverage key skill and competencies? Good basis of global competitive advantage?•Strong links and co-ordination between sub-units?

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Company EU Japan NAFTA Asian'Tigers'

EasternEurope

LatinAmerica

Rest ofWorld

Thorntons UK andFrance

Hershey Germany Jointventure

Nestlé Allmarkets

Allmarkets

Allmarkets

Allmarkets

Allmarkets

Allmarkets

Allmarkets

Table 8.2 Assessing global marketglobal market coverage

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Company EU Japan NAFTA Asian'Tigers'

EasternEurope

LatinAmerica

Rest ofWorld

Thorntons Manufacturesin UK andBelgium

Hershey Manufacturesin Germany

Jointventure

Homecountry;majorfacilities

Nestlé CorporateHQ inSwitzerland;productionfacilitiesin mostcountries

All keymarkets

All keymarkets

All keymarkets

All keymarkets

All keymarkets

Table 8.3 Location of key value-adding activities

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World chocolate confectionery industryWorld chocolate confectionery industry

ThorntonsThorntons• limited market coverage, focused on UK, France• Production: UK, Belgium• Niche player selling chocolate specialities (no global

ambitions)

HersheyHershey• strong presence in US, joint venture in Japan, weak in EU• Ambition to develop greater market coverage

NestléNestlé• Extensive world coverage, acquiring national players• Production: in strategically important countries• Global brands, but recognizing local tastes• Overall strategyOverall strategy formed by the center (acquisitions), locallocal

autonomy

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1. Product-market segments1. Product-market segments

Narrow product focus Broad based competitor

2. Products/service offer2. Products/service offer

Costumised for local/national market Standardised globally

3. Competitive moves. Competitive moves

Based on a country by country approach Co-ordinated globally

Key: ThorntonsThorntons HersheyHershey NestléNestlé

Figure 8.4 Assessing product-market competitors

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After examining competitors,

further questions:

• Is it important to operate with global market coverage and scale?

• Are there surviving competitive niches?

• Competitive strategies of individual companies are realistic and sustainable?

Adapt following tactics, strategies

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Strategies to be followedStrategies to be followed

a) Cross-subsidiation of countriesCross-subsidiation of countries• against indigenous national players or

• large competitor dependent on specific market

b) Globally co-ordinated movesGlobally co-ordinated moves fragmented country-by-country strategy: a set of competitive

strategies

– Price competitionPrice competition:

– Non-price (hidden) competitionNon-price (hidden) competition

– Co-operation/cCo-operation/coollaboratllaboratiionon

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– Price competitionPrice competition:

excess capacity, new aggressive player => imbalance, discontinuity» against a weak national player: it leaves the industry» against a global one: risky, more expensive, uncertain

– Non-price (hidden) competitionNon-price (hidden) competition:

Less direct way of competition, “hidden”» advertising, promotion: expensive» answer: differentiate products if it is a global competitors

– Co-operation/cCo-operation/coollaboratllaboratiionon instead of competition» mutual need» final form: acquisition (large/small, national/global)» few have universal coverage => try extend geographically =>

emerging countries (China)» complete global network

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3. Intern’l strategic alliances3. Intern’l strategic alliances

Motives:• Access to knowledge, expertise and skills

possessed by another organization– key driver: possess different configuration of core

competencies and resources,

– offering attractive option

• Access to new geographical markets (Honda-Rover)

• Spreading financial or political risk

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Honda and RoverHonda and Rover

1978: similar size, began developing strategic alliance

HondaHonda: profit making, gaining access to Europe market

partner with EU market experiences

EU: protectionism, overcapacity

RoverRover: dealer network in UK, EU, spare capacity

losses, struggling for reestablish after reconstruction,

govm’t support, likelihood of change of gov’t

develop new product range: resource needed

1978: limited agreement => Triumph AcclaimTriumph Acclaim with HondaHonda kit

Developments:with HondaHonda platform renewing RoverRover models

joint venture: developing new platform

co-production, cross-sourcing

Honda acquiring 20% of RoverRover equity stake

RoverRover: back to profit, improvement in quality and reputation, organizational learning

Retained distinctive identities

Early 1994: Rover is sold by British Aerospace to BMW

Rover-HondaHonda alliance at risk - hard joint development broken

They do not wish to see the alliance continueThey do not wish to see the alliance continue

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Generic types of int’l strategic alliencesGeneric types of int’l strategic alliences

• Joint venturesJoint ventures– separate legal entity, free-standing organization

– partners: equity share holders, providing resources

– difficulties: one partner wishes acquire full control

• Non-joint venturesNon-joint ventures (collaboration)– no separate legal entity collaborative agreements

– may be cross-company shareholdings

– limited in scope, scale

– initial phase, later can be extended

• ConsortiumConsortium• (cont.)

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• ConsortiumConsortiumEach company individually unable to completely fund R$D,

necessary volume

Believe: pooling resources they can compete

Number of partners to undertake a large-scale activity (Exp.:

Airbus)

Factors contributing to the success:Factors contributing to the success:– strategic need: each has a continuing need for the other

– shared objectives (otherwise: conflict at future direction)

– shared risk and commitment (otherwise no more investments)

– agrred procedures for resolving disputes (strengthen/undermine) => personal relationship

– trust: most critical (builds up slowly - eroding quickly by an action)

Advisable: understanding circumstances in which alliance can Advisable: understanding circumstances in which alliance can be terminatedbe terminated

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F. SATO, Toshiba’s president:F. SATO, Toshiba’s president:

even the largest and best resourced organizations are likely to seek develop some form of int’l strategic alliance in some respect of their business.

“Strategic alliancesStrategic alliances are attractive for a number of reasons:are attractive for a number of reasons:

“For example, the digital revolution and the development of multimedia can only reach fruition through their cross-fertilization of technologies, bringing together partners from the media, communication and computing. We are contributing here through our links with Time WarnerTime Warner and other companies.”

•“Another consideration is cost. New technologies require enormous investments in research, plant and equipment. Alliance like ours with IBMIBM and SiemensSiemens for development of 256-megabit DRAMs allow partners to maximise the use of their resources, realise cost of advantages and speed up development. Moreover, the diffusion of the developed technology also encourages competition at the production stage.”

•“Finally, the dynamic pace and vast extent of modern technology is just too much for a single company. Today, no company can avoid incorporating technology from other companies in its products. The best way to do that is by building up trustbuilding up trust and working togetherworking together in design-in and similar projects.”

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Multi-localInternational

Co-ordinated international

regional

Global Global companycompany

Figure 8.5 The overlap between different organisational forms employed by worldwide competitors

4. Organizational forms for worldwide 4. Organizational forms for worldwide competitorscompetitors

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1. Product1. Product

Localised for a national market Standardised for the global market

2. Resources, responsibilities and control2. Resources, responsibilities and control

Decentralised to a national organisation Centralised on a global basis

3. Dominant power group and culture3. Dominant power group and culture

Country-based managers; independent culture

Figure 8.6 Distinguishing between the global company and multi-local organisation

Multi-local Global

Multi-local Global

Multi-local Global

Centralised functions; dependent culture

4. Research and development and innovation4. Research and development and innovationMulti-local Global

National facilities; ’local’ new product development

Centralised R&D and new product development

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Global Global companycompany

Key: Country-based national subsidiaries

Corporate centre based in ’home’ country

Dominant decision flow: centre to subsidiaries

Figure 8.7 The organisation of the global company

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Key: Country-based national subsidiaries

Corporate centre based in ’home’ country

Dominant decision flow: loose control of subsidiaries by corporate centre

Figure 8.8 The multi-local organisation

Multi-

local

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Intern’lcompany

Key: Country-based national subsidiaries

Corporate centre based in ’home’ country

Dominant decision flow: largerly from corporate centre to subsidiary, but with some independence on key aspects of local strategy

Figure 8.9 The organisation of the international company

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Intrenational company

Headquarter

Intrernational divisionHome

product divisions

National subsidaries A, B, C … product divisions

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AdvantagesAdvantages

• product/service offer focuses on regional preferences

• avoid costly duplication of facilities by configuring functions on a regional basis

• achieve regional-scale efficiences

DisadvantagesDisadvantages

• potential loss of contact with national markets

• inability to gain global-scale efficiencies

• organisational structures may become highly complex and potentially contradictory

Table 8.4 Co-ordinated international regional strategy

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Multi-local

• Product/service offer: Developed for local markets.• Resources, responsibilities and control: Resources largely

decentralised to local organisation. Local organisations highly autonomous, with little intervention from the corporate centre.

• Dominant power group and elite: Country-based national managers. Independent culture based on national organisations.

• R&D and innovation: National R&D facilities to support local product development.

• OVERALL: Each national subsidiary managed as an independent entity. Highly responsive national organisation. Independence of subsidiaries encourages innovation and development of new products to meet local needs.

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International• Product/service offer: Centrally developed products, customised for

local needs.• Resources, responsibilities and control: Greater dependence on

corporate centre than for multi-local, but more autonomy than global. Core competences centralised. Sophisticated management systems and specialist corporate staff to control subsidiaries.

• Dominant power group and elite: Functional managers, especially technical and marketing. Parent company management often superior and parochial in attitude to international operations.

• R&D and innovation: R&D facilities centralised and many likely to be located in the country of the corporate parent. Products developed centrally 'given' to national subsidiaries to customise.

• OVERALL: Foreign subsidiaries often seen as appendages. Parent company seeks to leverage transfer of knowledge, understanding and skills to national subsidiaries.

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Co-ordinated international regional

• Product/service offer: Product, standardised for the region, with minor modifications for national markets where necessary.

• Resources, responsibilities and control: Key resource areas centralised on an international regional basis, with some relatively minor functions left with country-based operations.

• Dominant power group and elite: Regional product managers. Emerging culture of international regional interdependence.

• R&D and innovation: At least some R&D facilities regionally based.• OVERALL: Strong co-ordination and integration of functions on

a regional basis. Able to achieve regional scale. Little or no co-ordination between international regions.

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Global company

• Product/service offer: Standardised product sold worldwide, with possible cosmetic changes for local markets.

• Resources, responsibilities and control: Centralisation of assets, resources and responsibilities. Overseas subsidiaries depend on corporate centre for resources and direction.

• Dominant power group and elite: Centralised product divisions. Highly dependent culture based on parent company’s home location.

• R&D and innovation: R&D facilities wholly centralised in 'home' location. National subsidiaries unable independently to develop new products. New ideas need to be adopted by corporate centre.

• OVERALL: Role of local units is to assemble and/or sell products developed centrally. National subsidiaries largely concerned with implementing plans and policies developed by corporate centre. Strength is ability to achieve global scale.