Global business management

MGT704_LectureSlides_Week1_Chapter1ATMCS22019.ppt

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MGT704 Global Business Management

Module1: Strategising in a global context

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Outline

What is strategy?
Fundamental questions in strategy
What is cross-border strategy?
What is globalisation?
Cross-border strategy and the globalisation debate

Strategising in a Global context

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

Contemporary view of global strategy understands the importance of responding to local needs

Why Study Cross-border Strategy?

A pre-requisite in top ranked large firms
Dealing with foreign-owned suppliers is common in all businesses
Domestic corporations can buy foreign-owned corporations
Domestic corporations can be bought by foreign-owned corporations

What Is Strategy?

Origin – Greek word (strategos) “art of the general”

Sun Tzu, Chinese military strategist in 500 BC

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

Integrate both planning and action viewpoints

What Is Strategy? (continued)

Leverage the concept of “theory,” which serves both as an explanation and a prediction

Requires replications and experimentations

Understand the difficulty of strategic change

Strategy is a firm’s theory about how to compete successfully

Strategy should be communicated in a powerful but easy-to-remember way

Strategy should give coherence to decisions and actions

Managers must exercise strategic leadership

Fundamental Questions in Strategy

Why do firms differ?

Cultural differences between Western and Japanese firms

Networks of relationships have powerful effect
– keiretsu, guanxi, chaebol, blat

How do firms behave?

Industry-based view – focus on competitive forces affecting an industry, external opportunities and threats

Resource-based (capabilities) view – focus on internal strengths and weaknesses, firm-specific resources and capabilities

Institution-based view – includes formal and informal “rules of the game”

Fundamental Questions in Strategy (continued)

What determines the scope of the firm?
What determines the success or failure of firms around the globe?

Balanced scorecard: A performance evaluation method from the customer, internal, innovation and learning, and financial perspective

How do customers see us?

What must we excel at?

Can we continue to improve and create value?

How do we look to shareholders?

The Strategy Tripod:
Three Leading Perspectives on Strategy

What Is Global Strategy?

Provide standardized products and/or services on a worldwide basis (traditional view)
Any strategy outside one’s home country
Contemporary definition of global strategy

Cross-border strategies of different firms around the globe

MNEs and smaller firms

Both developed and emerging economies

Both international and domestic markets

Responding to local market pressures

Providing foreign market wants and needs

What Is Globalisation?

The close integration of countries and peoples of the world

New force sweeping through the world in recent times?

Long-run historical evolution since the dawn of history?

Closer integration of the countries and people of the world?

Pendulum view: Globalization swings between embracing and restricting due to success, world events, crises, etc.

A process similar to the swing of a pendulum: Postwar history, emerging economies, outsourcing, MNEs, terrorist attacks, BRIC, recession…

Semiglobalization: Market barriers are high but not high enough to completely insulate countries

Global Strategy and Globalisation Debate

Events require making strategic choices in this complex, rapidly moving world

Anti-globalisation protests

Terrorist attacks

Economic crises

Corporate governance crisis (Asian Financial Crisis, Global Financial Crisis)

Global Strategy and Globalization Debate (continued)

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 (of students, instructors, and managers)

Strategic choices for organisations

Home country replication

International replication of home country competencies

Localisation (multinational)

Each foreign country/region regarded as a stand-alone local market with significant attention and adaptation

Global standardisation

Minimal or no local adaptation

Transnational

Simultaneous focus on both cost efficiency through integration globally and local responsiveness

Based on Bartlett and Ghosal 1989

Is Global Strategy different?

Operating in a specific foreign market can create barriers

Profit not necessarily guaranteed

Ghemawat (2001) offers a framework for evaluating profit potential of a specific foreign market

Operating in multiple foreign markets adds complexity

Ghemawat’s (2001) CAGE framework

Use CAGE framework as a checklist

Source : Ghemawat (2001) p140

Next week

Resource-based and market-based considerations