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Building Strategic Capabilities

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Title: Building Strategic Capabilities Author: Kim Sokoya Last modified by: Sokoya, Kim Created Date: 5/29/1997 3:24:36 AM Document presentation format – PowerPoint PPT presentation

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Title: Building Strategic Capabilities


1
Building Strategic Capabilities
  • Given the forces for localization,
    regionalization and globalization what are the
    options for a MNC?

2
Different and sometimes contradictory views
  • Levitt suggests standardization
  • Some suggest production of wide variety of
    products to achieve economies of scale and meet
    national requirements. MNCs must manage
    interdependently
  • Some suggest exploiting economies of scope,
    sharing technologies and other things

3
Building Strategic Capabilities
  • What is the Challenge of MNCs?

4
Building Strategic Capabilities
  • Achieve simultaneously the three objectives of
    global scale efficiency, multinational
    flexibility and worldwide learning.

5
Need to exploit differences in markets among many
countries
  • Need to look for opportunities to develop
    economies of scope
  • Need to leverage scale economies from different
    activities around the world.

6
Building Strategic Capabilities
  • The goals for an effective MNC are efficiency,
    flexibility and worldwide learning, and the means
    are national differences, economies of scope and
    scale

7
Global Efficiency
  • Increasing revenues vs. lowering costs
  • Global Integration vs. national responsiveness
  • e.g..... of Toyota and Fiat. Toyota is more
    globally integrated, but Fiat is more dispersed
    taking advantage of country specific advantages
  • Analyzing the industry and company value chain,
    and focusing on forces that drive cost.

8
Multinational flexibility
  • Managing risks and exploiting opportunities that
    result from operating in diverse environment.
  • Requires scanning the environment to detect
    changes and discontinuities that present new
    risks and new opportunities
  • Sources of national differences generally
    include
  • macroeconomic variables such as interest rates,
    wage rates, exchange rates and commodity prices.

9
multinational flexibility cont....
  • political risks - actions taken by national
    governments. These actions may be influenced by
    MNCs
  • competitive risks - actions of other competitors,
    which tend to be different in different types of
    market and countries.
  • resource risks - uncertainty associated with lack
    of resources which will be different from
    country to country

10
Worldwide Learning
  • Presupposes that competencies are not the
    monopoly of HQ
  • foray into different countries to exploit home
    country capabilities, exposed many MNCs to
    different stimuli.
  • some have used this exposure to learn from the
    diverse environment.
  • mere exposure to diversity does not guarantee
    that learning will take place.
  • appropriate structure and systems must be
    developed to allow such learning to take place.

11
Means - National differences
  • Differences in factor endowments
  • National differences in output market will
    necessitate different marketing strategies.
  • Rationalized production- producing in different
    places to take advantage of differences in costs
    of production.
  • Note that comparative advantage does not
    necessarily lead to competitive advantage.

12
Means - Scale Economies
  • Expand volume of output to achieve scale
    benefits, i.e... cost reduction.
  • Learning curve concept suggests that the scale
    effect is magnified as a result of accumulative
    learning that results in further cost reduction.
  • Focus on scale efficiencies may result in
    inflexibility as a result of increased
    specialization.

13
Means - Scope Economies
  • Sharing of cost across value chains of two or
    more products, e.g... sharing of information, or
    distribution channel to market different
    products, or expanding product line to meet the
    requirement of existing customers
  • STRATEGIC ORIENTATIONS FACING MNCS?

14
Strategic Orientations
15
International Strategy
  • - Exploiting home country innovation on a
    worldwide basis. What is done at home is sent out
    to different markets. Markets of interest tend to
    be less advanced overseas markets.

16
Multinational Strategy
  • responding to national differences by focusing
    on flexibility, and emphasizing revenue
    enhancement. Innovations tend to be for local
    market, and cost benefit analysis is based on
    market by market analysis. Assets are
    decentralized and self sufficient for local
    market.

17
Global strategy -
  • global efficiency is goal, with focus on best
    cost and product/service quality. Assets and
    competencies are centralized and on a global
    scale.

18
Transnational-
  • Assets and competencies are dispersed, not
    necessarily in home country, markets are given
    specialties, and there is interdependency among
    markets. Efficiency, flexibility and worldwide
    learning are pursued simultaneously.

19
Strategic Orientations
  • Note that it is possible to use a combination of
    strategies for different businesses, activities
    within these businesses, and geographical areas
    within these activities.

20
The Strategic Tasks for Worldwide Competitive
Advantage.
  • Defending worldwide dominance.
  • Need to defend and reinforce existing assets and
    capabilities.
  • Challenging the Global Leader
  • Using a different business model to operate in
    the industry. (Amazon, Samsung, MOOCs )
  • Protect domestic niches
  • Changing domestic competitive landscape, tariff
    protection, some form of strategic alliance.
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