Global Strategic Management

1. Global Strategic Management Philips & Matsushita: Types of International Strategy

2. MULTI-DOMESTIC STRATEGY Product is fully customized in each country. Decentralized federation of national organizations. Local decision making authority. Effective when differences between countries are large. Sources of Advantage: Differentiation Local responsiveness Minimize political risk Minimize rate exchange risk GLOBAL STRATEGY Product is standardized worldwide Centralized organization structure. National subsidiaries possess little decision-making authority. Effective when differences between countries are small. Sources of Advantage: Cost Ability to coordinate activities Speed in new product development TYPES OF INTERNATIONAL STRATEGY

3. Pressures for Local Differentiation A FRAMEWORK FOR ANALYSIS Pressures for Global Integration

4. A Framework:Global Integration - Local Differentiation High Global Strategy Forces for Global Integration Local Strategy Multi-domestic Strategy Low Low High Forces for Local Differentiation

5. GLOBAL STRATEGY • STRATEGIC INTENT: Gain Global Market Share Leadership • POLICIES: • Specialized Production and R&D Centers • Break Down Value Chain and Exploit Low Cost Locations • World Products to Build Volume and Global Product Roll-out • Price Leadership • Optimize Global Network at Local Expense • International Human Resources HQ Source: J. de la Torre

6. The Extreme Global Value Chain Country Activities Manu- facturing A B C D E F G H Design Purchasing Etc. R & D Design Purch- asing Manu- facturing Marketing Selling Distrib- ution Service

7. THE GLOBAL MAXIMIZER • Some Companies Emphasizing this Approach: • Matsushita • IBM • American Express • LM Ericsson • Toyota • Sony • Royal Dutch Shell • Caterpillar • Hewlett Packard • Boeing • Intel • Coca Cola THERE IS RELATIVELY LITTLE ROOM FOR JOINT VENTURES IN THIS MODEL, EXCEPT FOR UPSTREAM ACTIVITIES. ACQUISITIONS PLAY A SECONDARY ROLE VS. INTERNAL GROWTH AND GREENFIELD INVESTMENTS. Source: J. de la Torre

8. 2. A MULTI-DOMESTIC STRATEGY • STRATEGIC INTENT: Gain Key Positions in • Selected Markets • POLICIES: • Tailor Products to National Idiosyncrasies • Differentiated Operations • Sacrifice Efficiency for Market Access • Reach Economies of Scale Upstream • Maximize Local Value Added • Gain Government Support • Use Join Ventures to Preempt Competition and Add Local Value • National Human Resources HOLDING Source: J. de la Torre

9. The Fully Multi-local Value Chain Country Activities R & D Design Purch- asing Manu- facturing Market-ing Selling Distrib- ution Service A B C * * * * Z R & D Design Purch- asing Manu- facturing Market-ing Selling Distrib- ution Service R & D Design Purch- asing Manu- facturing Market-ing Selling Distrib- ution Service R & D Design Purch- asing Manu- facturing Market-ing Selling Distrib- ution Service

10. THE FEDERALIST • Some Companies Emphasizing this Approach: • Philips • Nestlé • BASF • General Motors • Carrefour • Wal-Mart • Unilever • Procter & Gamble • Federal Express • PricewaterhouseCoopers • KPMG • Heineken THERE IS AMPLE ROOM FOR JOINT VENTURES AND LOCAL AFFILIATIONS IN THIS MODEL. ACQUISITIONS PLAY AN IMPORTANT ROLE TO OBTAIN DOMESTIC PRESENCE IN IMPORTANT MARKETS Source: J. de la Torre

11. Linking Market, Strategy, Structure & Processes

12. Where Next ? High ? Forces for Global Integration Low Low High Forces for Local Responsiveness