Business Strategy Lecture 10 -Global Trends

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Business Strategy Lecture 10 -Global Trends

• John Birchall

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International Expansion

• Link to inside-out perspective and to the
  challenge of growth (Lecture 7 expansion by
  seeking new markets is just one growth option)
• Early stages of internationalisation
• Delivery of value founded on existing competences
• Organisation seeks new customers for an
  established product or service
• Operations stay domestic sales offices or joint
  ventures are set up abroad
• International divisions may follow, bringing the
  organisation closer to each market outside-in

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Multi national Growth

• Operations move abroad
• Production facilities and service centres are
  established
• Closer to customers
• Closer to sources of raw materials
• In regions with well-trained and/or low-paid
  workers
• In regions with excellent infrastructure

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Global Integration

• Aim to co-ordinate sales and/or operations in a
  wide range of countries
• Method divisional, matrix or tran-snational
  structure?
• Examples few Western success stories
• Japan is famous for the centralised hub (Honda)
• many American firms have global brands, few are
  globally integrated
• Xerox is one exception (Harrison 2003 345-347)
• European firms are traditionally decentralised
  with strong foreign subsidiaries
• A few have strong integration within functions,
  but their branding is weak (Philips Electronics
  NV, Unilever

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Choices and Strategies

• Divisions Product, Country/Market or Functional,
  with varying levels of central co-ordination and
  control
• Support an expansion strategy using capital from
  global financial markets
• Involve choices and trade-offs
• Global branding or local positioning?
• Inside-out efficiency or Outside-in
  responsiveness?
• Corporate Matrix combines two dimensions
• Transnational Network three-dimensional
• supports an integrated (hybrid) strategy of both
  product and market development
• Firm seeks both global efficiency and local
  responsiveness
• Communications must be excellent (Stacey 2003
  Ch. 16)

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The Three Dimensions of A Transnational Structure
In-car entertainment
Home entertainment
Hand-held gadgets
U.S.A.
Marketing Operations Research
Development
Asia
Europe

• (Harrison 2003 315)

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Network Structure
Regional Offices Develop specialized resources
and capabilities
Office
Office
Office
Office
Office
Office
Flows of components, products, resources, people
and information
Flows of people and information supporting a
complex process of shared strategic decision
making
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Relationships with Other Firms

• Remember Porters Five Forces?
• Industry attractiveness
• Choice of competitive position
• Porter went on to write The Competitive Advantage
  of Nations (2nd edn 1998. Basingstoke Palgrave)
• This gives us Porters Diamond
• Attractiveness of countries to certain clusters
  of firms
• Examples German cars, Swiss chocolate, Hollywood
  and Bollywood

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Porters Diamond The Basic Model
Firm Strategy, Structure and Rivalry
Factor Conditions
Demand Conditions
Related and Supporting Industries
Source Adapted with the permission of the Free
Press, an imprint of Simon Schuster Adult
Publishing Group (see Harrison 2003 351 for
complete reference)
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Compare Porters Five Forces
Threat of new entrants
Bargaining power of customers
Bargaining power of suppliers
Threat of substitute products or services
Source Adapted with the permission of the Free
Press, an imprint of Simon Schuster Adult
Publishing Group (see Harrison 2003 53 for
complete reference)
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The Diamond

• Adds in Factor Conditions
• Link to the search for raw materials, workers and
  supporting infrastructure
• Keeps a strong emphasis on Customers
• Link to the outside-in perspective market demand
  conditions
• Downplays the threat from Substitutes and New
  Entrants
• Link to emerging theories of networks and
  strategic alliances stress on clusters and on
  Related and Supporting Industries

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The Challenge of Culture

• Cross-cultural communication
• Difficult yet vital
• For emergent strategy to be effective, staff must
  
• understand the leaders vision
• speak their own minds
• be heard and understood
• Successful strategic alliances need it too
• Barriers to communication across cultures
• language
• customs
• style
• respect

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Men are from Mars, Women are from Venus

• Cultural issues are not only important in
  international business
• In all organisations culture influences
• How we make sense of our own experience
• How we put our reflections into words
• Whether our colleagues and managers can hear what
  we say
• Whether they want to listen
• How they understand

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