INDEX1.The Uruguay Round Agreements2.A Comprehensive Model of Global Competitive Dynamics3.Global business growth model in SE Asia: A market-driven model4.Potential Sources of Economies of Scope for Firms Pursuing Global Strategies Tariff and Nontariff Trade Barriers5. Industry Globalization Potential6. A Framework for Global Strategy7. How Global Strategy Levers Achieve Globalization Benefits8. Global Competitive Moves9. The Dimension of International Strategy10. Types of International Strategy11. Assessing Corporate Globality A Framework for Choice of Products12. A Framework for Choice of Markets Alternative Modes of Entry13.Greenfield Versus Cross-Border Acquisition14.What Is a Global Mindset?How a Global Mindset Differs from a Parochial or a Diffused Mindset15.To convert global presence into global competitive advantage, the 16.Drivers of Global Value: The Star Framework17.Scope Economies in Product and Market 18.Worldwide Advantage: Goals and Means 19.Strategic Orientation and Configuration of Assets 20.Elements of Global Organization21.Desired Organization Features for Types of Geographic Strategies22.Different Corporate Approaches to Worldwide Strategy23.Match of Organizational and Strategic Logic24.Structural Options for Firms Pursuing Global Strategies28.Local Responsiveness, Global Integration, and Organizational Structure29.Factors Influencing the Propensity of a Firm to Enter into Strategic Alliances30.The ICV Decision Tree

The Uruguay Round Agreements(concluded in Geneva, Dec 15, 1993 and signed as a declaration in Marakesh, Marocco, April 15, 1994)

1.Agreements on Trade in Agricultural Products, Textiles, Garments and Other Manufactured Products.2.Agreements on Trade in Services3.Agreements on Trade-Related Investment Measures (TRIMs)4.Agreements on Trade-Related Intellectual Property Rights (TRIPs)Changing ParadigmsA Poli-centricNation-state growthDomesticPassiveAn Econ-centricMarket-driven growthGlobalDynamic

A Comprehensive Model of Global Competitive DynamicsIndustry-based considerationsResource-based considerationsConcentrationIndustry leaderProduct homogeneityEntry barriersMarket commonality with rivalsValuable abilities to attack, deter, and retaliateRarity of certain assetsImitability of competitive actionsOrganizational skills for actionsResource similarity with rivalsInstitution-based considerationsDomestic competition: Primarily competition / antitrust policy

International competition; Primarily trade / antidumping policyCompetitivedynamicsAttack / Counterattack /Cooperation

Global business growth model in SE Asia:A market-driven modelForeigninvestmentRegionalintegrationExportsMarkets Home marketsExisting marketsEmerging marketsHosteconomies

TNCindustrialisation

Potential Sources of Economies of Scope for Firms Pursuing Global StrategiesSource : Barney, 2007:4781.To gain access to new customers for current products or services2.To gain access to low-cost factors of production3.To develop new core competencies4.To leverage current core competencies in new ways5To manage corporate riskTariff and Nontariff Trade BarriersTariffs: taxes levied on imported goods or servicesQuotas: quantity limitson the number of productsor services that can be importedNontariff barriers: rules,regulations, and policies thatincrease the cost of importingproducts or servicesImport duties

Supplemental duties

Variable levies

Border levies

Countervailing dutiesVoluntary quotas

Involuntary quotas

Restricted import licenses

Minimum import limits

EmbargoesGovernment policiesGovernment procurement policiesGovernment-sponsored exportsubsidiesDomestic assistance programs

Custom policiesValuation systemsTariff classificationsDocumentation requirementsFees

Quality standardsPackaging standardsLabeling standards

MARKETDRIVERSCOSTDRIVERSGOVERNMENTDRIVERSCOMPETITIVEDRIVERSMarket DriversCommon customer needsGlobal customersGlobal channelsTransferable marketingLead countriesCost DriversGlobal scale economiesSteep experience curve effectSourcing efficienciesFavorable logisticsDifferences in country costs(including exchange rates)High product development costFast changing technologyGovernment DriversFavorable trade policiesCompatible technical standardsCommon marketing regulationsGovernment-owned competitorsand customersHost government concernsCompetitive DriversHigh exports and importsCompetitors from different continentsInterdependence of countriesCompetitors globalizedINDUSTRYGLOBALIZATIONPOTENTIALIndustry Globalization Potential

A Framework for Global StrategyPosition and Resources of Business and Parent CompanyIndustryGlobalizationDriversOrganizationsAbility to Implement a Global StrategyAppropriateSetting for GlobalStrategy LeversBenefits/Costs ofGlobal StrategySource: Yip, 2003: 6

How Global Strategy Levers Achieve Globalization BenefitsBenefitsImproved QualityEnhanced CustomerPreferenceSource: Yip, 1992:20; 2003: 17Cost ReductionIncreases volume foreconomies of scale.Reduces duplication ofdevelopment efforts.

Reduces purchasing,production, and inventorycosts.Competitive LeverageVia exposure to demandingcustomers and innovativecompetitors.Via global availability,global serviceability, andglobal recognition.Advantage of early entry.Provides more sites forattack and counterattackhostage for good behavior,Earlier or greatercommitment to a marketthan warranted on ownmerits.Focuses development andmanagement resources.Allows consumers to usefamiliar product whileabroad.

Allows organizations to usesame product acrosscountry units.Basis for low-cost invasionof markets.

Offsets disadvantage of lowmarket share.

Less responsive to localneeds.Reduces duplication ofactivities.Helps exploit economies ofscale.Exploits differences incountry factor costs.Partial concentration allowsflexibility versus currencychanges and versusbargaining parties.Focuses effort.

Allows more consistentquality control.Allows maintenance of costadvantage independent oflocal conditions

Provides flexibility onwhere to base competitiveadvantage.Distances activities fromcustomer.

Increases currency risk.

Increases risk of creatingcompetitors.

More difficultto manage value chain.Reduces design andproduction costs ofmarketing programs.Focuses talent and resources.Leverages scarce, goodideas.Reinforces marketingmessages by exposingcustomer to the same mix indifferent countries.Reduces adaptation to localcustomer behavior andmarketing environmentMagnifies resourceavailable to any country.

Provides more options andleverage in attack and defenceLocal competitiveness maybe sacrificed.Major DrawbacksAll Levers incurCoordination Costs, PlusGlobal MarketParticipation

Global Strategy LeversGlobal ProductsGlobal Locationof ActivitiesGlobalMarketingGlobalCompetitiveMoves

Definition

Using profits from one country in which a business participates to subsidize competitive actions in another country.

Defending against a competitive attack in one country by coun- tering in another country.Simultaneous or planned sequence in which competitive moves are made in different countries in the same business.

Identifying actual and potential global competitors and selecting an overall posture - attack, avoidance, cooperation, or acquisi-tion - for each.Analyzing strengths and weaknesses, opportunities and threats for each global competitor in each major country and developing a competitive plan of action for each country-competitor combination.Being the first competitor to make use of a particular element ofglobal strategy - global market participation, global products, global activity location, and global marketing. Global Competitive MovesA global strategy approach to competitive moves means integrating competitive moves across countries rather than making moves one country at a time.Type of Move

Cross-countrysubsidization

Counterparry

Globally coordinatedsequence of moves

Targeting of globalcompetitors

Developing country-competitor plans

Preemptive use ofglobal strategy

The Dimension of International StrategyHighCoordinationof ActivitiesLowGeographicallyDispersedGeographicallyConcentratedValueActivitiesConfiguration of Activities

Source: Porter (1986) as edited by Wortzel & Wortzel, 1997:134.Types of International StrategyHighCoordinationof ActivitiesLowValueActivitiesHigh ForeignInvestment withExtensive Coordinationamong SubsidiariesPurest GlobalStrategyCountry-CenteredStrategy byMultinationalswith a Number ofDomestic FirmsOperating in Only One CountryExport-BasedStrategy withDecentralizedMarketing

ModeratelyattractiveMost attractiveLeastattractiveModeratelyattractiveLowLowHighHighExpected Payoffs from GlobalizationRequiredDegreeof LocalAdaptationSource: Govindarajan & Gupta, 2001:24 A Framework for Choice of ProductsAssessing Corporate GlobalityGlobalizationof CapitalBaseGlobalizationof CorporateMindsetGlobalizationof SupplyChainGlobalizationof MarketPresenceSource: Govindarajan & Gupta, 2001:8

LowHighLowHighFirms Ability to Exploit the MarketStrategicImportanceof MarketA Framework for Choice of Markets100%Exports100%0%100%LocalProductionsExports Versus Local ProductionDegree ofOwnershipControl OverActivitiesPerformed inthe ForeignMarketAlternative Modes of Entry

Greenfield operationsor cross-borderacquisitionsGreenfield operationsCross-borderacquisitionsGreenfield operationsor cross-borderacquisitionsLowHighGrowthMature orDecliningHighMarketGrowthRateGreenfield Versus Cross-Border AcquisitionUniqueness of Corporate Culture

ParochialMindset(Low D - High I)GolbalMindset(High D - High I)ParochialMindset(Low D - Low I)DiffusedMindset(High D - Low I)Closed to DiversityAcrossCultures andMarketsHow a Global Mindset Differs from a Parochial or a Diffused MindsetAble to Integrate Diversity Across Cultures and MarketsUnable to Integrate Diversity Across Cultures and MarketsOpen to DiversityAcrossCultures andMarketsOpen to DiversityAcross Cultures andMarkets?Able to Integrate Diversity Across Cultures and MarketsKnowledgeable AboutDiversity Across Cultures and Markets?NoYesNoNoYesYesLack of Global MindsetLack of Global MindsetLack of Global MindsetGlobal MindsetWhat Is a Global Mindset?

1.Adapting to local market differences Benefits :-Increased market share - Improved price realization - Neutralizing local competitors

2. Exploiting economies of global scale Benefits : - Spreading fixed cost over larger volume - Reducing capital and operating costs per unit - Pooling global purchasing power over suppliers - Creating requisite critical mass in selected activities

3. Exploiting economies of global scope Benefits : - Providing coordinated services to global customers - Market power vis-a-vis competitors

4. Tapping the most optimal locations for activities and resources Benefits : - Performance enhancement - Cost reduction - Risk reduction

5. Maximizing knowledge transfer across locations Benefits : - Faster product and process innovation - Lower cost of innovation - Reduced risk of competitive preemption

6. Playing the global chess game To convert global presence into global competitive advantage, the company must pursue six value creation opportunities as follows:

Drivers of Global Value: The Star FrameworkADCBAABCDFBCDActivity architecture(concentration, differentiated center, or dispersion ? )Locational competencies(building world-class competencies)Global coordination(ensuring frictionless coordination)-Ensuring critical mass and full exploitation of economies of scale-Optimizing both the qualityand cost competitiveness-Eliminating unnecessaryduplicationUpstream:world-class competenciesDownstream:world-class market sensingand selling competencies-Using an incentive system-Instituting a bench-marking system-giving high visibility to outstanding individualsChanges ?-Shifts in factor cost differences- Changes in tariff regimes- Trends in demand patterns- Variations in product design- Adoption of new manufacturingtechnologiesA-Best in industry (Ideal)B-Above average (Good)C-Industry average (Satisfactory)D-Below average (Poor)F-Worst in industry (Totally unsatisfactory)Adapted from Gupta & Govindarajan, AME, Vol. 15, No.2, pp.51-55.

Mapping of Global AmbitionSource: Philippe Lasserre (2012), Global Strategic Management, 3rd ed., New York: Palgrave Macmillan, p.35.

The Global Revenue Index (GRI) is calculated by taking the ratio of the company distribution of sales in the major world regions to the industry distribution of demand in the same regions. It is calculated with the formula:GRI = {Ixn(cum RXn + cum RX(n-1))}Goodyear: calculation of the global revenue index (GRI)The Global Capability Index (GCI) is calculated in a similar way, but instead of taking the distribution of sales, one takes the distribution of assets for capital-intensive industries or else of personnel.Source: Philippe Lasserre (2012), Global Strategic Management, 3rd ed., New York: Palgrave Macmillan, pp.64-66. Distribution of saleAsia (%) Rest of the World (%) Europe (%)North America (%)Industry301331 26Goodyear RX111234 43Cum RX112357100Cum RX-n 01123 57Cum RX + cum RX-n113480157Ix *(cum RX + cum RX-n) 3.3 4.42 24.80 40.82Then Goodyears GRI (%) = 3.3 + 4.42 + 24.80 + 40.82 = 73.34

Scope Economies in Product and Market DiversificationSources of Scope EconomiesProduct DiversificationMarket DiversificationShared physical assets

Shared external relations

Shared learningFactory automation with flexibilityto produce multiple products (Ford)

Using common distribution channelsfor multiple products (Samsung)

Shared R&D in computer andcommunications business (NEC)

Global brand name (Nokia)

Servicing multinational customersworldwide (Citibank)

Pooling knowledge developed indifferent markets (Procter &Gamble)Source: Bartlett, Ghoshal & Beamish, 2008:202

Worldwide Advantage: Goals and MeansSources of Competitive AdvantageStrategic ObjectivesAchieving efficiency incurrent operations

Managing risksthroughmultinationalflexibility

Innovation, learning,and adaptationNational DifferencesScale EconomiesScope EconomiesBenefiting fromdifferences in factorcostswages andcost of capital

Managing differentkinds of risks arisingfrom market- or policy-induced changes incomparative advantagesof different countries

Learning from societaldifferences inorganizational andmanagerial processesand systemsExpanding andexploiting potentialscale economies ineach activity

Balancing scale with strategic andoperationalflexibility

Benefiting from experiencecostreduction andinnovationSharing of investmentsand costs acrossmarkets andbusinesses

Portfolio diversificationof risks and creation ofoptions and side bets

Shared learning acrossorganizationalcomponents indifferent products,markets, or businessesSource: Bartlett, Ghoshal & Beamish, 2008:203

Strategic Orientation and Configuration of Assets and Capabilities in Multinational,International, Global, and Transnational CompaniesStategic orientation

Configuration ofassets andcapabilitiesMultinationalInternationalTransnationalGlobalBuilding flexibility torespond to nationaldifferences throughstrong, resourceful,and entrepreneurialnational operations

Decentralized andnationally self-sufficientExpoiting parent-company knowledgeand capabilitiesthrough worldwidediffusion andadaptation

Sources of corecompetenciescentralized, othersdecentralizedBuilding costadvantagesthroughcentralized,global-scaleoperations

Centralized and globallyscaledDeveloping global efficiency,flexibility, andworldwidelearningcapabilitysimultaneously

Dispersed,interdependent,and specializedSource: Bartlett, Ghoshal & Beamish, 2008:206

OrganizationStructureManagementProcessesCulturePeopleAbility to Developand ImplementGlobal StrategyElements of Global OrganizationGlobal Strategy Information SystemCross-Country CoordinationGlobal Knowledge SharingGlobal Strategic PlanningGlobal BudgetingGlobal Customer ManagementGlobal Performance Review and CompensationIntegrated Global AuthorityAbsence of Domestic/International SplitStrong Business DimensionUse of Foreign NationalsMulticountry CareersFrequent TravelStatements and Actions of LeadersGlobal Boards of DirectorsGlobal IdentityCommitment to Worldwide(v. Domestic) EmploymentInterdependence(v. Autonomy) of Businesses

Desired Organization Features for Types of Geographic StrategiesGlobal

Multilocal

Export-BasedCentralized global authorityNo domestic-international split

Strong geographicdimension relativeto business and function

Dispersed national authority

No domestic-international split

Strong geographic dimension relative to business andfunction

Centralized home country control

Separate domestic and international divisions

May have strong functional dimensionExtensive coordinationprocessesGlobal sharing of technology

Global strategyGlobal information system

Global strategic planning, budgets, performance review, and compensation

Transfer of technologyfrom headquarters out

National information systems

National strategic planning, budgets, performance review, and compensation

Direction not coordination

One-way informationflow to headquarters

No technology transferFocus on sales targetsMulticountry careers

Foreign nationals in home and third countries

Extensive travel

Professionalexpatriates

Nationals runlocal businesses

Limited travel

Home country nationals runlocal marketing subsidiariesGlobal identity

Interdependence

Multinationalidentity

Autonomy

Home countryculture

Source: Yip, 2003: 185GeographicScopeOrganizationStructureManagementProcessesPeopleCulture

Different Corporate Approaches to Worldwide StrategyCountries

U.S.A.JapanGermanyetc.A B C D EBusinessesFragmented Multilocal Strategies

Match of Organizational and Strategic LogicOrganizational LogicStrategic LogicFragmentedGlobalNationalFirmsGlobalIntegrationOptimal Positions

Source : Bartlett &Ghoshal (1989) as quoted by Barney, 2007:503Decentralized federation

Coordinated federation

Centralized hub

Transnational structureStrategic and operational decisions are delegated to divisions / country companies

Operational decisions are delegated to divisions / country companies; strategic decisions are retained at corporate headquarters

Strategic and operational decisions are retained at corporate headquartes.

Strategic and operational decisions are delegated to those organizational entities that maximize responsiveness to local conditions and global integration Structural Options for Firms Pursuing Global Strategies

Local Responsiveness, Global Integration, and Organizational StructureDecentralizedfederation(The Europeans)TransnationalstructureCoordinatedfederation(The Americans)Centralizedhub(The Japanese)HighHighLowLowImportance of Global IntegrationImportance of Local ResponsivenessSource : Barney, 2007: 505; cf. Grant, 2008:385-389.

A. Firm Characteristics

Product-market diversity of firmFirms size and resource position (abilityto mobilize resources independently)Prior involvement in strategic alliancesTop managements attitudes towards strategic alliancesCorporate cultureB. Industry Characteristics

Minimum efficient scaleConvergence of industries and associated costs of product developmentImportance of speed of entry into marketCost structureThreat of new entrantsThreat of competition from substitutesC. Environmental Characteristics

Changes in buying patternsDegree of market uncertaintyRate of technological changeBreadth of competencies/skills/capabilities required to capitalize on environmental opportunitiesPolitical, legal and regulatory environmentPropensity of Firm to Enter into Strategic AlliancesFactors Influencing the Propensity of a Firm to Enter into Strategic AlliancesSource: Varadarajan & Cunningham, 1995: 291

The ICV Decision TreeSTAGE 1STAGE 2STAGE 3DecisionMakers WorldwideStrategyCoalitionPoliticsDecisionContextRoutineResponsesResourceConstraintsStakeholdersAsset SpecificityOpportunismTacitness of ResourceNon-Core BusinessResource PreservationNeed for ComplimentaryAssetsGovernment PolicyResource Type*Tacit resources*Physical resourcesNetwork Relations* Trust*OpportunismGlobalization StrategyCultural Similarity*Organizational*NationalResource TypeNetwork PositionRoutinesLearning PotentialInterdependenciesBargaining Power*Ownership Ratio*RelativeDependencyDEALFAILSICVMARKETWOSMARKETFAILUREHIERARCHICALINEFFICIENCYHIERARCHICALSUCCESSMARKETSUCCESSCJVEJVCONTRACTFAILSCONTRACTNEGOTIATEDEJV NEGOTIATEDManagementContract

Turn-Key Plant

Franchise

Supplier Contract

Service ContractIndependent EJV

Dominant EJV

Shared EJVSource: Tallman & Shenkar in Wortzel & Wortzel, 1997: 254