Strategic Analysis Report
Sam1994
InternationalStrategies.pptx
Corporate Strategy.
Week 2: Lecture
International and Global Strategies
Understand the role of globalization for strategy
- issues & challenges for managers.
Apply the Integration-Responsiveness Framework:
- Global integration versus local responsiveness.
Distinguish four types of strategies:
- international, global, multi-domestic, trans-national
Learning Outcomes.
2
Global vs. International
Globalization…at its simplest means crossing borders. Capital crosses borders; companies cross borders; whole industries cross borders; people, ideas, diseases, even governments cross borders. (The Economist, 2001)
But can we accept such a definition of globalization?
People, ideas and private companies have crossed borders for hundreds of years. There is a major difference between internationalization and globalization…
Internationalization
Internationalization refers to…
processes involving the simple extension of economic activities across national boundaries. It is, essentially a quantitative process which leads to a more extensive geographical pattern of economic activity. (Peter Dicken)
Globalization
Globalization is…
different from internationalization processes. Globalization involves not merely the geographical extension of economic activity across national boundaries but also - and more importantly - the functional integration of such internationally dispersed activities. (Peter Dicken)
Think of this example:
Bata versus Nike
Some observers are sceptical about globalization e.g.:
“The system has become more integrated or globalized in many respects. Nonetheless what has resulted is still very far from a globally integrated economy.” (Glyn/Sutcliffe)
Despite globalization, the importance of national and sub-national “spaces” has remained or even increased:
The impact of globalization has been highly uneven
National cultural identities persist
Sub-national political entities & economic clusters persist
Institutional differences – law, corporate governance, financing of firms, role of the state – continue to impact international firms
But do we have a global world?
6
Measuring Globalization: KOF Index
Globalizing processes do not happen everywhere in the same way and at the same rate. Overall, developed economies are most involved in globalization (global interconnectedness).
Uneven Impact on Industries
Today, some industries are much more globalized than others (e.g. consumer electronics v. cement). This can be explained with “globalization drivers”:
Market drivers (homogeneous customer needs, presence of global customers etc.)
Cost drivers (scale economies, differences in country costs etc.)
Competitive drivers (presence of global rivals, need for co-operation with global rivals)
Government drivers (quality or environmental standards, host government protectionism, etc.)
9
“Paradoxically, at the same time as transactional boundaries weaken, there is a increased awareness of cultural differences and a growing celebration of cultural diversity.
The same increasingly intensive international circulation of ideas through the internet, telecommunications and other media that promotes the dominant economic ideology of a free global market seems to be strengthening cultural and sub-cultural identities at the same time.”
(John Child, 2000)
Globalization and Cultural Identities
Integration-Responsiveness Framework
IR framework: To achieve the dual objectives of global integration and local responsiveness.
Global integration means coordinating the firm’s value chain activities across many markets to achieve worldwide efficiency and synergy to take advantage of similarities across countries.
Seeking economic efficiency on a worldwide scale, promoting learning and cross-fertilization within the global network.
More likely be emphasized by firms in aircraft manufacturing, credit cards, and pharmaceuticals.
Pressures: Economies of scale; converging consumer trends and universal needs; uniform service to global customers; global sourcing of raw materials, components, energy, and labor; global competitors; availability of media.
IR Framework
Local responsiveness: Meeting the specific needs of buyers in individual countries.
Adapting to customer needs, the competitive environment, and the distribution structure.
Local managers enjoy substantial freedom to adjust the firm’s practices to suit distinctive local conditions.
Companies in such industries as food and beverages, retailing, and book publishing are likely to be responsive to local differences.
Pressures: Unique resources and capabilities available to the firm; diversity of local customer needs; differences in distribution channels; local competition; cultural differences; host government requirements and regulations.
What Strategy?
Globalisation, semi-globalisation or regionalisation??
Please watch this video by Prof. Pankaj Ghemawat
http://video.ft.com/v/62436038001/Iese-The-age-of-semi-globalisation
When is each strategy appropriate?
Strategies for Multinational Enterprises
GLOBAL
STRATEGY
Need for Global Integration
and
Low Cost
Need for Local Market Responsiveness
Low
High
Low
High
GLOBAL
STRATEGY
TRANSNATIONAL
STRATEGY
International”
Strategy
“Home replication strategy”
MULTIDOMESTIC
STRATEGY
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61
International (Home Replication) Strategy
The firm views international business (IB) as separate from, and secondary to, its domestic business.
IB is regarded as an opportunity to generate incremental sales for domestic product lines, often via exporting or foreign agents.
Products are designed with domestic customers in mind, and IB is sought as a way of extending the product lifecycle and replicating its home market success.
The firm expects little knowledge flows from foreign operations.
Examples: Scottish whiskey distilleries, Scottish knitwear producers or Scottish SMEs in the oil and gas sector, as they are small and overwhelmingly rely on home-based advantages
Multidomestic Strategy
Also called multilocal strategy: An MNE delegates considerable autonomy to each country manager.
Business units in one country are independent of each other
Products tailored to suit the unique needs of each country.
Country managers tend to be highly independent entrepreneurs and have little incentive to share knowledge and experiences with managers elsewhere.
An easy option for firms with limited international experience as they can delegate many tasks to their country managers.
May lead to inefficient manufacturing, redundant operations, and generally higher costs of international operations.
Examples: multinational media firms such as 21st Century Fox or multinational insurance firms such as Aviva, food producers such as Nestle, as there are significant barriers to global integration,
Nestle world-wide
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Global Strategy
Seeks substantial control over its country operations to achieve maximum efficiency, learning, integration worldwide, and greater central coordination and control, with various product or business managers having global responsibility.
Products are standardized across national markets
Emphasizes economies of scale and global efficiency
Activities such as R&D and manufacturing are centralized at headquarters, and management tends to view the world as one market.
It is challenging for management since the firm must maintain ongoing communication between headquarters and the subsidiaries, as well as among the subsidiaries.
Examples: IKEA or McDonalds, as they are able to keep local responsiveness to a minimum (e.g. 90% of IKEA’s product line is identical, but IKEA modifies some of its furniture offerings)
Multi-Domestic and Global Industries
Multi-domestic industries – Industries in which competition takes place on a country-by-country basis.
Food and beverage, consumer products, and clothing and fashion industries.
Each country tends to have a unique set of competitors.
Global industries – Competition on regional or worldwide scale.
Aerospace, automobiles, metals, computers, telecom, chemicals, and industrial equipment.
A handful of major players that compete in multiple markets, e.g., Kodak, Fuji and Agfa-Gevaert, American Standard and Toto, Caterpillar and Komatsu
Formulating and implementing strategy is more critical for global industries than multi-domestic industries.
Transnational Strategy
A coordinated approach to internationalization in which the firm strives to be more responsive to local needs while retaining sufficient central control of operations to ensure efficiency and learning.
Seeks to achieve both global efficiency and local responsiveness
It combines the major advantages of multi-domestic and global strategies, while minimizing their disadvantages.
It implies a flexible approach: standardize where feasible; adapt where appropriate.
It requires planning, resource allocation, and uniform policies on a global basis.
Examples: Engineering and construction firms such as the Swiss-based ABB and Brazil’s Odebrecht have many transnational characteristics – they benefit from global integration but they must remain highly responsive to local factors such as national building regulations.
Transnational MNE
UK
Chile
India
Japan
USA
HK
Mexico
UK
Multidomestic MNE
HK
Japan
USA
Global MNE
UK
HK
Japan
USA
Managing Dual Pressures Global Integration -VS- Local Responsiveness
High
High
Low
Low
Global Integration
Local Responsiveness Pressures
Country Differences in
- consumer tastes/preferences
- infrastructure/practices
- distribution channels
- host government needs
Paper,
wheat
Cosmetics, food,
household goods
Cost Reduction
Pressures
