Global Strategy: A Synthesis

1. Global Strategy: A Synthesis Timothy Devinney

2. Why do Companies Invest Overseas? • The Seeking of New Markets • Seeking of New Resources • Seeking of Greater Operational Efficiency

3. The Imperatives—A General IBS Framework Orgn Cultural Orgn History Technology Orgn Structure Distn of Business Product Structr Local Economic Conditions Local Cultural / Sociodemographic Conditions Local Political Environment Firm Strategic Disposition Orgn Cultural Orgn History Technology Orgn Structure Distn of Business Product Structr Firm Strategic Disposition Local Economic Conditions Local Cultural / Sociodemographic Conditions Intl Economic Conditions Local Political Environment

4. Entry Modes

5. Globalization Pressures Economics of Production “Global is Better” Economics of Adaptation “Local is Better” PUSH PULL GLOBALIZATION

6. The Two Extremes of International Strategy The extent to which the operations of the firm are integrated along a single dimension ?????? Multinational Integration Global Integration Multifocal National Responsiveness National Responsiveness The extent to which the companies operations and products are responsive to market differences

7. Dimensions of International Organisation Structure— Devinney et al High Economies of scale and scope increase the sources and applications and efficiency in use Global Integration Diversity of sources, type and uses increase Low Local Responsiveness High Transactional Completeness Becomes more proprietary and protectible High

8. The Roles for Country/Regional Organisations Contributor Strategic Leader High Local Competence Black Hole Implementor Low Low High Importance of Local Market Source: Bartlett & Ghoshal (1986)

9. Strategic Goals and Tools Tools Goals • Exploiting National Differences • Cost Differences (Comparative) • Customer Segmentation (Competitive) • Exploiting Economies of Scale • Exploiting Economies of Scope (Synergies) • Exploiting Intangible Assets (Knowledge & Expertise) • Efficiency of Operations (Profit) • Management of Risk (Financial & Operational) • Innovation, Learning and Adaptation (Renewal)

10. Source: Adapted from Bartlett & Ghoshal Strategic Orientation and Asset Configuration Multinational International Global Transnational Strategic Orientation Building flexibility to respond to national differences Exploiting parent company knowledge and capabilities Building cost advantages through global EOS Developing global efficiency while maintaining flexibility and the capacity to learn Assets and Capabilities Required Strong, resourceful and entrepreneurial national operations Effective mechanisms for diffusion and adaptation Size and the ability to manage standardisation Strong culture of communication and transference. Arm's length management control system Configuration of Assets and Capabilities Decentralised and nationally self-sufficient Sources of competency centralised. Operations decentralised Centralised and globally scaled Interdependent, dispersed,specialised and controlled

11. Source: Adapted from Bartlett & Ghoshal Implications for Synthesizing Global Strategy Tools Goals Natl Differences Scale Economies Scope Economies Intangible Assets Efficiency High => Decentralization/ Network Low => Centralization High => Cost Leadership/ Standardization Low => Differentiation High => Cost Leadership/ Segmentation Low => Independent Operations High => Centralization/ Network Low => Decentralization Risk Management High => Internal Diversification of Dimensions That Market Can Not Provide Insurance (Political, World Macroeconomic, Social, Competitive, Resource). External Instruments (e.g., Options & Futures, Swaps, etc.) Where Risk is Marketable Adaption/ Flexibility High => Decentralization/ Network Low => Centralization High => Reliance on Modern Manufacturing Techiniques Stressing Variety and Speed (JIT, FMS) High => Centralization/ Network Low => Decentralization

12. Source: Adapted from Bartlett & Ghoshal A Framework for Synthesizing Global Strategy Tools Goals Natl Differences Scale Economies Scope Economies Intangible Assets Efficiency Profit Based on Customer and Supply Diversity Profit Based on Standardization and Size Profit Based on Production and Marketing Synergies Profit Based on Proprietary Knowledge and Expertise Risk Management Macroeconomic, Political, Competitor, and Resource Risks Risk Associated with a Lack of Flexibility Risk Associated with Joint Investment, Asset Specificity Adaption/ Flexibility Customer-Focus, Flexibility, Experience, and Knowledge Transfer Cost Reduction, Learning, and Process Engineering Knowledge and Expertise Transfer

13. Ten Macro Factors Leading to International Strategic Success • The firm sees itself as a MNE led by a TMT that is comfortable on the world stage • Develop integrated strategies that are costly and difficult to duplicate • Aggressively implement these strategies and back it with large investments • Understand that technological innovation is a phenomenon that goes beyond the US and Western Europe • Operate as if the world was one market • Have organizational structures designed to handle world problems • Have systems that keep them abreast of political developments • Have TMTs that are international in composition • Allow international outside directors to play an important role • Are well managed—stick close to customers, run a lean organisation, and encourage autonomy and entrepreneurial activity

14. The International Strategic Questions for Companies in an Emerging Liberalised Market • Developing a Strategy for Expansion Outside the Home Market • Solidifying the Home Market • Developing an Expansion Strategy • Developing a Strategy for Protecting the Home Market • Solidifying the Home Market • Developing a Strategy to Integrate into the International MNE Network • Finding "Fit" with Potential Partners

15. Strategic Fit & Political Risk of Market Entry Strategies Political & Economic Risk Normal Serious Extreme Joint Venture Good Fully-Owned Subsidiary Majority Controlled Minority Interest Sales Branch Majority Partnership Strategic Fit Satisfactory Pure Licensing Licensee with Small Participation Poor Indirect Exports