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Global Strategy

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Global Strategy Global Strategy Strategy: the action managers take to attain the goals of a firm General purpose: maximize/make profit Differentiate products ... – PowerPoint PPT presentation

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Title: Global Strategy


1
  • Global Strategy

2
Global Strategy
  • Strategy the action managers take to attain
    the goals of a firm
  • General purpose maximize/make profit
  • Differentiate products, increase price add
    value, features, quality, service
  • Achieve low cost
  • Key means allocation of scarce resources to
    attain goals

3
Activity Value Chain
  • Firm as a chain of discrete value creating
    activities
  • Primary
  • upstream activities, manufacturing
  • downstream activities marketing, sales, after
    sales service
  • Support
  • infrastructure (general and administrative)
  • human resources
  • research and development

4
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5
Global Expansion Benefits
  • Earn greater return from distinctive skills, core
    competences
  • Inimitable or difficult to imitate skills in
    value chain
  • Realize location economies
  • Choice of FDI location
  • Create multinational network of activities
    (global web)
  • Realize greater experience curve economies, which
    reduce the cost of value creation
  • Learning effects, economies of scale

Unit costs
Experience curve
B
A
Accumulated output
6
Pressures for Global Integration Local
Responsiveness
High
Ball bearings, wheat
Cost Reduction (Global Integration) Pressures
Cosmetics, food, household goods
Low
Low
High
Local Responsiveness Pressures
Differences in - consumer tastes/preferences -
infrastructure/practices - distribution
channels - host government needs/requirements
7
Strategic Choice
Transnational Strategy
High
Global Strategy
Cost Reduction (Global Integration) Pressures
Multidomestic Strategy
International Strategy
Low
Low
High
Local Responsiveness Pressures
8
Multidomestic MNC
HK
UK
Chile
USA
India
Japan
Mexico
Decentralized Federation - Many key assets,
responsibilities and decisions
localized Personal Control - Informal HQ-Sub
relationship, simple financial controls Multidomes
tic Mentality - Management sees overseas
operations as portfolio of independent
businesses
9
International MNC
HK
UK
Chile
USA
India
Japan
Mexico
Coordinated Federation - Key assets,
responsibilities decisions localized Administrativ
e Control - Centralized HQ control, formal
planning and control, tight HQ-Sub
linkage International Mentality - Management sees
overseas operations as appendages to a
domestic operation
10
Global MNC
HK
Chile
UK
USA
India
Japan
Mexico
Centralized Hub - Most strategic assets,
resources, responsibilities and decisions
centralized Operational Control - Tight HQ
control of decisions, resources,
information Global Mentality - Management sees
overseas operations as delivery pipelines to
a unified global market
11
Transnational MNC
HK
Chile
UK
USA
Japan
India
Mexico
Networked Organization - Distributed, specialized
resources and capabilities Interdependent Units -
large flows of components, products, resources,
people, and information Transnational
Mentality - Complex process of coordination and
cooperation in an environment of shared
decision making
12
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13
International Strategic Alliances
  • Cooperative agreements between competitors from
    different countries
  • Advantages
  • Facilitate entry into a foreign country
  • Allow fixed costs of new products and processes
    to be shared
  • Bring together complementary skills and assets
  • Help establish industry standards in technology
  • Allow reduction of operating costs,e.g., shared
    training, purchasing
  • Disadvantages
  • Give competitors a low cost route to new
    technology / markets
  • Disproportional benefit accrual to partners

14
Making alliances work which partner?
  • A suitable partner
  • Helps achieve strategic goals
  • Adds needed, valuable capabilities
  • Shares the firms vision for purpose of the
    alliance
  • Is not likely to exploit the alliance to its own
    ends
  • Steps to select a partner
  • Thorough background check via public sources
  • Advice from third parties who have personal
    experience with likely partner(s)
  • A lot of face-to-face time with likely partner(s)
    in their environment

15
Making alliances work - What Structure?
  • Protect technology/know-how that is not intended
    to be transferred
  • Draw a solid contract with safeguards against
    opportunism
  • Achieve equitable gain through agreed swaps of
    technology the other wants
  • Seek creditable, clearly articulated commitment
    to partner behavior a-priori

16
Making alliances work - How to manage?
  • Show sensitivity to cultural differences that
    explain different managerial styles
  • Build trust
  • Set up framework for formal and informal
    face-to-face meetings to create a common value
    system
  • Build informal network of personal relationships
  • Learn from partners
  • Apply the knowledge within your own organization
  • Brief your employees on partner strengths
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