International Management

1
International Management StrategyThe Global
Business EnvironmentMasters Degree Program in
International Management

• September 5, 2007
• Ingmar BjörkmanDepartment of Management
  Organization

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Objectives

• To provide you with an overview and understanding
  of management and strategy within the context of
  multinational corporations (MNCs), including the
  dynamics of interaction between MNCs and their
  environments
• To increase your knowledge of conceptual tools
  for analyzing the challenges facing MNC managers
  related to
• management and strategy
• the dynamics of interaction between MNCs and
  their environments
• To develop your ability to apply that knowledge
  and develop your skills by analyzing MNCs in
  different industries and in different situations
• To give you with a foundation for the rest of the
  program

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What is Strategy?
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Strategy as Plan/Design Different levels

• Vision What the organization seeks to become/do
  over the long term (ideal future state)
• Mission Statement of corporate purpose
• (Strategic) Objectives Specific performance
  targets in each of the areas covered by a firms
  vision
• Strategies Specified means through which firms
  accomplish mission and objectives
• Tactics Actions that firms undertake to
  implement their strategies

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Strategy, what strategy?

• Corporate strategy
• Overall scope of the firm - which industries to
  be in?
• Business strategy
• (within a strategic business unit SBU)
• How to compete in each industry?

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SWOT-analysis
Organizational Analysis
Environmental Analysis
Strategic
Strengths
Opportunities
Weaknesses
Threats
Choices
However, what are strengths and weaknesses? Where
do they stem from? What are opportunities and
threats? So what?? And which structural firm
factors lead to competitiveness?
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Strategic analysis
Strategy implementation
Strategic choice
A basic model of the strategic management
process but to what extent does it reflect
reality?
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Strategy design or emerging process?
Strategy as outcome of cultural, political, and
local experiential learning processes
Imposed strategy
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4
4
Intended (planned) strategy
Realised strategy
Unrealised strategy
Source Adapted from Professor Henry Mintzberg,
McGill University
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Three perspectives on organizations
Strategic design Engineering view of the
organization Actions are outcomes of strategic
design of organization, integration, compensation
, fit between elements
Political Negotiation view of the
organization Actions are outcomes of power Who
has power? What are the sources of power?
Cultural Habit view of the organization Actions
are outcomes of taken for granted views, values
and behavioral norms
The perspectives that we use also determine what
we see and how we interpret what we see
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Three strategic perspectives/paradigms
INDUSTRY COMPETITION
Exploit barriers to perfect competition in the
industry
VALUE INNOVATION
FIRM RESOURCES COMPETENCIES
Find innovative ways to deliver benefits
to customers costs effectively
Build and leverage a firms resource
and competence base
Source Professor Peter Zemsky, INSEAD
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The importance of position and fit
Customers
The Environment
The Firm
Industry competitors customers suppliers
Resources and Competencies
Strategy
General environment
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Globalization

• The shift towards a more integrated and
  interdependent world economy
• Different components
• The globalization of markets
• The globalization of production
• but also
• The globalization of innovations
• The globalization of valuable human resources
• The globalization of competitors
• Implications for firms?

1-2
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Globalization Drivers
Negative
Positive
Technology Open Markets Peace Global/Regional
Strategy Well functioning states Political
Institutional Integration
Market Barriers War, Social unrest Local
Strategy Lack of transparency, perceived country
risks Remaining Cultural Institutional
Differences Anti-globalization sentiments
1-3
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Tariff Rates
Average Tariff Rates on Manufactured Products
of Value
1-7
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Growth of World Trade and Output
1950100
1-6
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Changes in World Output Trade over Time
Table 1.2
1-9
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World Markets in Different Industries
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Globalization of the World Economy
Source UNCTAD, World Investment Report, 2005
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Globalization Possible Pros Cons

• Destroys manufacturing jobs in wealthy, advanced
  countries.
• Wage rates of unskilled workers in advanced
  countries declines (relatively speaking).
• Companies move to countries with fewer labor
  environment regulations (though tend there to
  have positive effects).
• Loss of sovereignty.

• Lower prices for goods and services.
• Economic growth stimulation.
• Increase in consumer income.
• Creates jobs.
• Countries specialize in production of goods and
  services that are produced most efficiently.
• Global economic growth leads to total job creation

1-13
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Multinational Corporations (MNCs)
Source UNCTAD, 2005
1990
2004
Total Numbers of MNCs 37000 70000
Total Number of Foreign affiliates 170000 690000
Total Assets of Foreign Affiliates 5390 B 36000 B
Total Sales of Foreign Affiliates 5727 B 18677 b
Employment of Foreign Affiliates (Thousand) 24471 57390
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Worlds largest firms by revenue
Fortune Global 500, 2006
Observe Although many firms are presented as
global, most have a large part of their
operations in their home region
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What are the Differences between International
and Domestic Business?
1-17
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Borders their significance

• State boundaries denote sovereignty, political
  authority, legal jurisdiction, common
  institutional rules regulations
• National cultures, national identity yes,
  arguably, but state boundaries and what
  constitutes relevant social units of analysis do
  not always coincide, and at the very minimum also
  other levels may be important
• Boundaries of mind and habit borders are
  psychological, not just physical
• ... and relevant borders are not only at the
  national level

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From Environmental Analysis to Industry Analysis
Adapted from Grant (2008 66)
The natural environment
The national/ international economy

• THE INDUSTRY
• ENVIRONMENT
• Suppliers
• Competitors
• Customers

Demographic structure
Technology
Government Politics
Social structure
Social structure

• The Macro Environment impacts the firm both
  directly and through its
• effect on the Industry Environment.
• The Industry Environment lies at the core of the
  Environment that all
• firms must analyze, respond to and shape.

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Some of the questions for the MNC

• Global/Regional ambitions?
• Where to go Why?
• sourcing, production, sales, RD
• How to enter (operational mode)?
• exports, direct investments, licensing, contract
  manufacturing, etc.
• How to manage it all?
• global control coordination? global learning?
  risk management?
• How to operate in each country, across functions?
• global standardization/integration vs. local
  adaptation/autonomy?