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Business Strategy Lecture 10 -Global Trends

Business Strategy Lecture 10 -Global Trends. John Birchall. 1. 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:

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Business Strategy Lecture 10 -Global Trends

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  1. Business Strategy Lecture 10 -Global Trends John Birchall 1

  2. 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

  3. 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

  4. 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

  5. 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)

  6. The Three Dimensions of A Transnational Structure (Harrison 2003: 315) In-car entertainment Home entertainment Hand-held gadgets U.S.A. Marketing Operations Research & Development Asia Europe 6

  7. Network Structure Information Centre 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 7

  8. Relationships with Other Firms Remember Porter’s 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 Porter’s Diamond Attractiveness of countries to certain clusters of firms Examples: German cars, Swiss chocolate, Hollywood and Bollywood 8

  9. Porter’s 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) 9

  10. Compare: Porter’s Five Forces Potential Entrants Industry Competitors Rivalry Among Existing Firms Suppliers Customers Substitutes 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) 10

  11. 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 11

  12. The Challenge of Culture Cross-cultural communication Difficult yet vital For emergent strategy to be effective, staff must understand the leader’s vision speak their own minds be heard and understood Successful strategic alliances need it too Barriers to communication across cultures: language customs style respect 12

  13. 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 13

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