Professional Documents
Culture Documents
Introductions
12
Course Description
This course on Corporate Internationalisation is
concerned with the dynamics of firm and industry
competition in the global economy and the
management competences required to meet the
challenges presented. The course takes the
perspective of firms active in the global economy,
both as incumbent multinationals or as firms
growing from peripheral regions and becoming
players in the world market.
The course is designed to develop the critical
conceptual frameworks needed to make sense of
the most important developments in the global
economy, from firm-level competitive postures, to
industry dynamics, country and regional
advantages, to the process of globalization itself. 13
14
Course Instruction
The course sessions will combine
lectures,
discussions,
cases,
videos,
presentations,
exercises,
and other activities.
16
Case Studies
Method traditionally used for the legal and
medical professions
Legal students have looked at precedent
setting cases (things that have occurred in
the past) to extract the important and
relevant points of law
Medical students look at example patient
files in a search for classic symptoms of
diseases
Not until the 1920's, however, was the case
study method used in other disciplines.
17
119
Economic
Socio Cultural
Entrepreneurial
Ethic
Learning and Growth
Customer Focused
124
126
Specific Recommendations:
Based on the above considerations, you are
ready to make final recommendations.
These should tell what you hope to
accomplish and how.
The difference between this and the previous
step is largely a matter of detail. In
generating a plan, the focus is on general
issues of plan implementation.
In this step, the focus is on specific, detailed
actions.
128
Expanding Abroad
132
Expanding Abroad
Motivations
Traditional
Secure Key Supplies
Market Seeking
Access low-cost factors of production
Emerging
Scale Economies
Increasing R+D investments
Shortening Product Life Cycles
Scanning and Learning
Competitive Positioning
133
Multinational Mentality
Managers begin to acknowledge and emphasise the
differences among national markets
Global Mentality
View of the world as one unit of analysis
National tastes and preferences are more similar than
different
Transnational Mentality
Demand to be responsive to local market needs and
pressures to develop global scale competitive efficiency are
simultaneous
Recognises the importance of flexible and responsive 134
country-level operations
Globalisation
135
Globalization
a la Thomas L. Friedman
A dynamic phenomenon
Inexorable integration of markets, nationstates and technologies
Enabling individuals, corporations & nation
states to reach around the world further,
faster, deeper and cheaper
136
137
Integration: www
Uncertainty: Change,
change and change
Dynamic: Fast, Faster
and still faster
138
139
140
141
Key features
a la Dominique Moisi
a la Legrain
143
A Different Story
Cross-border trade in goods and services has
tripled from $2,300 billion in 1980 to $6,800
billion in 1999. But .
World output has risen from $10,700 to $
30,900 billion in the same period
So, as a share of world output, cross-border
trade has only increased from 21.5% to 22%
over the last two decades
144
a la
Ferguson
145
De-Globalisation
Economic integration of the world has
coincided with its political disintegration and
fragmentation of the multicultural polity.
Excluding sub-Saharan Africa,
1871: 64 independent countries
1914: 59 independent countries
1946: 74 independent countries
1950: 89 independent countries
1995: 192 independent countries
146
147
148
63.5% of merchandise
trade is with other
members of the EU
Over 50% of exports
and 40% of imports
within Nafta
Under 50% of exports
and nearly 60% of
imports within the
Asian region by the
Asian countries
149
Regionalism
The rest of the world is linked to one or several of
these hubs through a tangled web of bilateral
trade agreements so called spaghetti bowl
Geography still matters: Politics matters too
High-touch services fastest growing part of rich
economies
60% of the worlds trade takes place on a
preferential basis
Over 170 regional trade agreements are in place
half of them since 1990
Every WTO member is a party to one with even
Japan and Korea getting on the bandwagon
150
Regional agreements
Bi-lateral or plu-rilateral
Involve all trade or just some
Between neighbours or span continents
Can be customs unions or free trade areas
May have common institutions
Mechanism for settling intra-trade
disputes
151
152
Impact of Regionalism
Some inter-regional rivalry sometimes
extending to hostility
A maze of preferential agreements, with
differing tariff rates, rules-of-origin
requirements and health regulations, distorts
trade and create new administrative burdens,
and even opportunities for corruption
But the much feared Fortress Europe has not
emerged - yet! - but the regional triad has less
need for access to others export markets than
others do to theirs
155
2.
3.
4.
156
4.
5.
6.
a la Simmonds
160
Challenges
Leveraging knowledge and talent worldwide
through technology
Globalisation exists because process
knowledge and other intangible assets can be
transferred globally at minimum costs
Technological innovations permit rapid
dissemination of know how to disparate parts
of the world
Economies of scale are measured in the
degree that fixed costs can be leveraged
among networks and regions
161
163
Whose Century?
Countries, Firms or Individuals?
Off-shoring extending to Knowledge work
China Trade surplus of $162 billion in 2004
with USA, increasing commodity
consumption and massive Infrastructural
development- e.g. total mileage expected to
overtake American Interstate system by 2020
Go Global Lenovo and IBM
Manufaketure
Personalisation
There is no such thing as a global
consumer.. Peter Brabeck
164
165
Class Outline
Managing Conflicting Demands
Global Integration
Local Responsiveness
Reading: Distance Still Matters
Case Study: The SK2 Globalisation Project
(Monday)
166
167
168
171
172
Cultural Differences
A large body of academic research provides strong
evidence that nationality plays an important and
enduring role in shaping the assumptions, beliefs
and values of individuals.
The most celebrated efforts made to understand
these differences were made by Geert Hofstede
study that described national culture differences
along four dimensions
Power Distance
Uncertainty Avoidance
Individualism
Masculinity
Government Demands
Diverse demands and expectations of home country
and host governments have perhaps been the most
severe constraint on the global strategies of many
companies
Traditionally the interactions between MNCs
(multinational corporations) have had many
attributes of a classic love-hate relationship
The love of the equation was built on the benefits
each could bring each other, source of funds, tax
breaks, technology, expertise etc.
The hate of the equation arose from the differences
in the motivations and objectives of the two
partners
175
(Contd)
(contd)
The emergence of the transnational industry has
made the tasks for achieving each of these
capabilities becoming more demanding and
complex.
To succeed in such an environment, companies
need to understand the logic of global chess,
building and defending profit sanctuaries that are
impenetrable to competitors
They need to leverage existing strengths to build
new advantages through cross subsidising weaker
products and market positions.
They also need to form alliances and coalitions to
isolate and outflank competitors
MNCs must now also build the capability to learn
from the many environments to which they are
exposed and to extend the benefits of this learning
180
throughout their global operations
Strategy Choices
181
Figure 8.1
182
Foreign
Competition
Begins Production
Firm Introduces
Innovation in
Domestic Market
Firm Begins
Production Abroad
184
Return on investment
Large investment projects may require global
markets to justify the capital outlays
Weak patent protection in some countries implies
that firms should expand overseas rapidly in
order to preempt imitators
185
186
materials
Lower
Key
cost labor
customers
Energy
187
SOURCE: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group,
from Competitive Advantage of Nations, by Michael E. Porter, p. 72. Copyright 1990, 1998 by Michael E. Porter.
Figure 8.2
188
Land
Natural resources
Infrastructure
190
191
192
International
CorporateLevel
Strategies
Figure 8.3
195
Multidomestic Strategy
Strategy and operating decisions are
decentralized to strategic business units
(SBU) in each country
Products and services are tailored to
local markets
Business units in one country are
independent of each other
Assumes markets differ by country or
regions
Focus on competition in each market
Prominent strategy among European
firms due to broad variety of cultures
and markets in Europe
196
Global Strategy
Products are standardized across
national markets
Decisions regarding business-level
strategies are centralized in the home
office
Strategic business units (SBU) are
assumed to be interdependent
Emphasizes economies of scale
Often lacks responsiveness to local
markets
Requires resource sharing and
coordination across borders (hard to
manage)
197
Transnational Strategy
Seeks to achieve both global
efficiency and local
responsiveness
Difficult to achieve because of
simultaneous requirements:
Strong central control and
coordination to achieve efficiency
Decentralization to achieve local
market responsiveness
198
Environmental Trends
Liability of foreignness
Legitimate concerns about the relative
attractiveness of global strategies
Global strategies not as prevalent as once
thought
Difficulty in implementing global strategies
Regionalization
Focusing on particular region(s) rather than on
global markets
Better understanding of the cultures, legal and
social norms
199
Characteristics
Exporting
Licensing
Strategic alliances
Acquisition
Optimal Solution
Export
Export
1101
Optimal Solution
Licensing
Licensing
1102
Optimal Solution
Strategic
StrategicAlliance
Alliance
1103
Optimal Solution
Strategic
StrategicAlliance
Alliance
1104
Optimal Solution
The
Thefirm
firmis
isfacing
facing
uncertain
uncertainsituations
situations
such
such as
asan
anemerging
emerging
economy
economyin
inits
itstargeted
targeted
market.
market.
Strategic
StrategicAlliance
Alliance
1105
Optimal Solution
The
Thefirms
firmsintellectual
intellectual
property
propertyrights
rightsin
in an
an
emerging
emergingeconomy
economyare
are
not
notwell
well protected,
protected,the
the
number
numberof
offirms
firmsin
inthe
the
industry
industryis
isgrowing
growingfast,
fast,
and
andthe
theneed
needfor
for global
global
integration
integrationis
ishigh.
high.
Wholly-owned
Wholly-owned
Subsidiary
Subsidiary
1106
1107
1109
Political
Risks
Economic
Risks
Political
Risks
Economic
Risks
1111
Figure 8.4a
1112
Figure 8.4b
1113
1114
1115
How to
Exploit the differences in sourcing and market
opportunities among the many countries in
which it operates
Capitalize on the diversity of its activities and
operations to create synergies or develop
economies of scope
Leverage the scale economies that are
potentially available in its different worldwide
activities
1117
1. Optimize global
efficiencies
2. Multinational flexibility
3.Worldwide learning
3. Scale economies
1118
Revenue side:
Strong portfolio of
brands
Powerful distribution
facilities
Access to key mkts
Local resources to
create/adapt
products/services
1119
Multinational flexibility
Ability to manage the risks and exploit the
opportunities that arise from the diversity
and volatility of the global environment
Risks and opportunities are two sides of the
same coin
1120
1121
Riskscontd
FIAT in Europe
1. Eastern Europe opening up
2. Single mkt EU
3. Japanese expansion into Europe
4. Aggressive diversification placing
pressure on resources
1122
Riskscontd
Environmental scanning detecting the
changes/discontinuities
Incrementalism + Opportunism versus
Pre-emptive resource commitments and
long range planning
More general and flexible strategies enable
robust response in different environments
1123
Worldwide Learning
Key asset of MNC: Diversity of
environments in which it operates leading
to:
Multiple stimuli
Diverse capabilities and
Broader learning opportunities
1124
Decentralized organization
1. No local sensing
2. Centre insensitive to
local sensing
1125
3.
Scale Economies
Experience/learning effects
Exploit varying (?) points of efficiency along value
chain
Need to balance scale and flexibility: craft vs. mass
production
Costs of the joint production/ development
/distribution of 2/more products can be less than
the cost of each separately
Challenge: The search for internal synergies within
the company and across its different activities
must have external consistency
1127
MNC:
Revenue side national differences
International:
Strengths - ability to create and leverage innovation
1129
1130
1131
1133
2.
3.
1134
1135
1136
1137
1138
Core Products
Definition: The components or subassemblies
that actually contribute to the value of end
products
Sustaining leadership in their chosen core
competence areas, companies seek to
maximize their world manufacturing share of
core products
Well targeted core products can lead to
economies of scale and scope
1139
1140
Beyond Structure
Recall goals: Optimize global efficiency,
National responsiveness and
Worldwide learning while.
Balancing organizational perspectives and
capabilities among product, function and area
divided by distance and time and separated by
barriers of culture and language
1141
1142
1143
1144
1145
1146
Administrative Heritage
Organizational history and the values,
norms and practices of its management
No such thing as a zero-based organization
need to focus on where we are coming
from as much as where we want to get
Hence:
Decentralized Federation
Coordinated Federation
Centralized Hub
1147
Organizational Models
1.
2.
Organizational Models
3. Centralized Hub:
Global strategy cost advantages and
quality with tight central control of product
development, manufacture and
procurement internal processes valued
group behaviour and interpersonal harmony
communications intensive and peopledependent
1149
Multi-National Perspectives
Strong national subsidiary management: local
consumers and host governments
Capable global business management: global
competitors and coordination responsiveness
Influential functional management: concentrate
corporate knowledge, information and expertise
and facilitate its transfer
Distributed Interdependent
Capabilities
1153
1155
1156
1157
Global Enterprise
1158
Distance
Documentation
Diversity
Demand
Denomination
1159
a la Ghemawat
1160
Administrative
Distance
Geographic Distance
Economic
Distance
different
languages
different
ethnicities; lack
of connective
ethnic or social
networks
different
religions
different social
norms
absence of colonial
ties
absence of shared
monetary or
political
association
political hostility
government
policies
institutional
weakness
physical remoteness
lack of a common
border
lack of sea or river
access
size of country
weak transportation
or communication
links
differences in
climates
differences in
consumer
incomes
differences in
cost and quality
of:
natural resources
financial
resources
human resources
infrastructure
intermediate
inputs
information or
knowledge
1161
Administrative
Distance
Geographic Distance
Economic
Distance
products have
high linguistic
content (TV)
products affect
cultural or
national identity
product
features vary in
terms of: size,
standards,
packaging
products carry
country specific
quality
associations
government
involvement is high
in areas that are:
producers of staple
goods or other
entitlements
large employers
large suppliers to
government
national champions
vital to nat. security
exploiters of natural
resources
s.t. high sunk costs
nature of demand
varies with
income level
economies of
standardization
or scale are
important
labor and other
factor cost
differences matter
distribution or
business systems
are different
companies need
to be responsive
and agile
1162
Admin. Distance
Preferential
Trading
Agreements
Geographic
Distance
Physical
Remoteness
Economic
Distance
Wealth Distances
meat/meat
preparation
cereals/cereal
preparation
misc. edible
products and
preparations
tobacco and tobacco
products
Office machines and
data-processing
equipment
gold, nonmonetary
electricity current
coffeee, tea, cocoa,
spices
textile fibres
sugar, sugar
preparations and
honey
electricity current
gas, natural and
manufactured
paper, paerboard
live animals
sugar, sugar
preparations and
honey
nonferrous metals
maufactured
fertilizers
meat and meat
preparations
iron and steel
pulp and waste
paper
1163
Admin. Distance
Preferential
Trading
Agreements
Geographic
Distance
Physical
Remoteness
Economic
Distance
Wealth Distances
photgraphic
apparatuses,
optical goods,
watches
road vehicles
cork and wood
metalworking
machinery
electricity current
1164
Per
Capita
Consump.
1165
1166
1167
1168
1169
1170
1171
1173
Saxon Style
1174
1175
1176
Saxon tradition
Penchant for documentation
Data (reality) unites and theory divides
Distrustful of theories and isms and
ologies sweeping generalizations
Reports, graphs, tables are seen as
necessary backup to support decisions
1177
Teutonic tradition
Like theories which are deductive
Theory may be deduced from other more
fundamental principles and is fertile for
practical deductions
Dont eschew data, but like to know the
philosophical or economic model or theory
that drives data collection and decision
making
1178
1179
1180
Decision-making groups
1181
Reactions:
Saxons: How do we document or measure
this?
Teutons: How can this be deduced from
first principles?
Gauls: Can this be expressed in French?
Nipponese: Who is the proposers boss?
1182
1183
Strategic Alliances
Definition:
A variety of different inter-firm
cooperation agreements ranging from
shared research to formal joint ventures
and minority equity participation
1. Strategic alliances are increasingly
between firms in industrialized countries
2. Creation of new products and
technologies
3. Forged during industry transitions
1187
1188
Technology Exchange
Major innovations increasingly a product of
interdisciplinary and inter-industry
advances
Shorter product life cycles increasing time
pressures and risk exposure while reducing
the potential payback of R&D investments
1189
Global Competition
Strategic alliances allow coalitions of
smaller partners to compete against a
dominant market player
The global/local dilemma
1190
Industry Convergence
Real or otherwise, much heralded belief in the
convergence of hi-tech industries
New products require massive investments, but
also diverse technological capabilities that defy
even the largest players
Alliances shape competition by
1. reducing competitive intensity by excluding
potential entrants and isolating particular players
and
2. building complex integrated value chains that
can act as a barrier to those who choose to go it
alone
1191
1193
1194
Skills and
competencies explicit
and embodied in
specific individual
machines or drawings
and hence liable to
easy observation and
emulation
1196
1198
Challenges
1. Strategic and environmental disparities
2. Lack of common experience and
perception base
3. Difficulties in inter-firm communication
4. Conflicts of interest and priorities
5. Personal differences among individuals
managing the interface
1199
1200
Escalating Commitment
Champions often different from the
operational managers
Involve key operating managers gives
continuity and ensures that the broader
strategic goals are related to specific
operational detail
1201
Alliance Scope
Start simple and focused
Management complexity added by:
1. Complicated cross holdings of ownership
or equity
2. The need for cross-functional
coordination or integration
3. Breadth in the number and scope of
activities
1202
1203
Managing
Structuring the interface
Integrating the interface exploit the learning
opportunities and prevent outflows of information
or knowledge
Need gatekeepers: well versed in the companys
internal organizational process, credibility and
status, understanding of the companys business
and strategies
Supportive administrative processes to facilitate
transfers and monitoring of effectiveness
1204
1205
Strategic Alliances
Easy but not the best facade of recovery
Not necessarily permanent - self
perpetuating
Flexibility is the key - adapt
Organization must be able to diffuse and
leverage learning from the partner
integrated network organization
1206
Collaboration principles
1. Collaboration is competition in a different form
represents a change in competitive tactics not
goals
2. Harmony is not the most important measure of
success
3. Cooperation has limits companies must defend
against competitive compromise
4. Learning from partners is paramount
5. The surging latecomer versus the laggard
learning and avoidance
1207
1208
1209
1210
introduction
is managing globally a stretch too far?
our approach
current views of global management
what managing involves
what global managing involves
can this be achieved?
conclusion
1211
1212
business managers
country managers
functional managers
1213
1214
informational roles
monitor
disseminator
spokesman
require management of information
interpersonal roles
figurehead
leader
liaison
require a manager to act to get things
done
action roles
entrepreneur
disturbance handler
resource allocator
negotiator
require a manager to make decisions
1215
1216
El
Salv ador
Nordic
Austria
Ecuador
Global
Headquarters
Canada
Peru
Chile
Brazil
Switzerland
U.S.A.
Bolivia
Belgium
Venezu
ela-la
Mexico
Apple
Products
U.K.
Argentina
Holland
Greece
Ireland
Spain
Apple
Europe
Sales,
Service, and
Marketing to
Regions
Columbia
Uruguay
Apple
U.S.A.
South
Africa
Kenya
Egypt
France
Zaire
Zimbabwe
Germany
Zambia
Japan
Bangladesh
Pakis tan
Turkey
Taiwan
Philippines
India
Korea
Malaysi
a
Iran
Syria
Thailand
Singapore
Source: Sumantra Ghoshal & Christopher A. Bartlett, "The multinatio nal corporatio n as
an international network,"
Academy of Management Review,
Japan
Europe
South
Latin
America
Worldwide
Product
Group A
Worldwide
Product
Group B
Worldwide
Product
Group C
R&D
R&D
R&D
Finance &
Accounting
Domestic and
World Production
Domestic Sales
Finance &
Accounting
Domestic and
World Production
Domestic Sales
Finance &
Accounting
Domestic and
World Production
Domestic Sales
Foreign Subsidiaries
for Sales, Production,
or Raw Material
Sourcing
Foreign Subsidiaries
for Sales, Production,
or Raw Material
Sourcing
Foreign Subsidiaries
for Sales, Production,
or Raw Material
Sourcing
Israel
Australia
New
Zealand
Australia
Europe North
Tanzania
Italy
Indonesia
Canada
Europe West
Headquarters
Morocco
Nigeria
France
Far East
Tunisia
Luxemburg
Apple
Pacific
Iraq
Hong
Kong
Lebanon
1217
global complexity
timezones
cultures
(Hofstede, 1980)
countries
languages
distant majorities
(Maigetter and Ragettli, 1997)
technology interacting with people you cannot see
customers
1218
1219
1220
emotional stability
extraversion
openness to experience
agreeableness
conscientiousness
1221
learning
ability to learn is a core skill for a global manager
uses feedback
cross-culturally adventurous
seeks opportunities to learn
is open to criticism
seeks feedback
is flexible
(Spreitzer et al., 1997)
these may have different meanings in different
cultures and may need adjustments
1222
1223
Branson @
Virgin Group
1224
1225
1226