PART FIVE
GLOBAL STRATEGY, STRUCTURE, AND IMPLEMENTATION
CHAPTER ELEVEN
THE STRATEGY OF INTERNATIONAL BUSINESS
OBJECTIVES
•
•
•
•
•
To examine the idea of industry structure, firm strategy, and value creation
To profile the features and functions of the value chain framework
To appreciate how managers configure and coordinate a value chain
To identify the dimensions that shape how managers develop strategy
To profile the types of strategies firms use in international business
CHAPTER OVERVIEW
Chapter Eleven presents tools and concepts used in analyzing and formulating
international business strategy. First, the relationship between industry structure and
competition in global industries is examined. Next, value chain analysis is used to
identify the internal capabilities of the firm that can be leveraged to create competitive
advantage. Effective international strategy depends greatly on the proper configuration
and management of a company’s global value chain. The sometimes conflicting
demands of global integration versus local responsiveness are examined. Finally, a
typology of strategic alternatives including multidomestic, international, global, and
transnational strategies is presented.
CHAPTER OUTLINE
OPENING CASE:
ZARA—VALUE CREATION IN THE
GLOBAL APPAREL INDUSTRY
[See Map 11.1.]
Zara, a large clothing retailer headquartered in northwest Spain, has used an innovative
strategy to power its global expansion. The company has grown to more than 400 stores
around the world with annual sales in excess of $4 billion since its founding in 1975.
Zara has made extensive use of information technology and e-business methods to
implement dramatic reductions in the time it takes to design, manufacture, and distribute
fashionable clothing at moderate prices. Zara has achieved extraordinary speed and
flexibility and can take a new design from the catwalk in Paris to its store shelf in New
York in as little as two weeks, compared with the industry average of six months. Rather
than having seasonal clothing collections, Zara has “live collections” in which no style
lasts more than four weeks. The company purchases much of its fabric not yet dyed so it
122
can make color changes quickly during and between seasons. Unlike many of its
competitors, Zara produces its most time- and fashion-sensitive products internally. It
employs more than 14,000 people in 20 company owned factories to produce about 40
percent of Zara’s finished product. These factories are highly automated to control costs
and further speed production. Sophisticated distribution centers in Spain, Brazil, and
Mexico are used to keep inventory moving efficiently from factory and supplier to store.
Most clothes are only in the distribution center a few hours, and none is ever there more
than three days. Stores are located in high-profile locations. Store managers and staff
choose their merchandise and keep in close touch with local trends. By constantly
rotating merchandise, Zara creates a climate of scarcity and opportunity for loyal
customers.
TEACHING TIPS: Carefully review the PowerPoint slides for Chapter Eleven, as
well as the opening case regarding Zara, which is cited throughout the chapter.
I.
INTRODUCTION
This chapter shifts the focus from external factors that exert influence on the
international business to internal decision making that helps determine how
effectively a given firm competes in its industry. The concepts that anchor
managers’ evaluation of strategy, the tools that support their strategic choices, and
the processes that managers use to ultimately convert their analyses into strategies
that create superior value in international markets are all examined.
II. INDUSTRY, STRATEGY, AND FIRM PERFORMANCE
The industry a company operates in can significantly influence its profitability. As
postulated by the industry organization (IO) paradigm, the forces in the MNE’s
environment that routinely have the greatest impact on its strategy are in its
immediate industry and competitive environment. Research indicates that industry
effects explain up to 75 percent of the difference in average returns for companies.
Despite this influence, significant variation does occur within given industries and
companies. Industry structure is not necessarily deterministic of firm performance—
the quality of both management and strategy also has an impact. The fact that
competition is not necessarily perfect creates the potential for a company to convert
an innovative strategy into superior competitiveness. Managers must understand
what strategy is, the tools that they can use to make it, and the implication of their
choices to the performance of their company.
A. The Idea of Industry Structure
Industry structure can be understood better by modeling the so-called “five
fundamental forces” of an industry. These forces include (1) rivalry among
competing sellers, (2) the potential for new entrants to enter the industry, (3) the
likelihood that substitute products will be offered by firms in other industries,
(4) the push by input suppliers to charge more for their inputs, and (5) the push
by output buyers to pay less for products. This model helps managers to
understand the industry’s potential for profitability, as well as the basis for
123
estimating the kinds of strategic moves that companies in the industry are likely
to use.
B. Industry Change
The structure of industries is dynamic, with new products, new firms, new
markets, and new managers triggering new developments that impact the five
industry forces. Changes in variables such as the long-term industry growth
rate, new technologies, new consumer buying and usage patterns, manufacturing
innovations, government regulation, and the diffusion of business and technical
expertise across countries can all lead to industry change.
C. Strategy and Value
A great strategy defines the perspectives and tools managers use to appraise the
company’s present situation, identifies the direction the company should go, and
determines how the company will get there. Strategies are ultimately about
creating value. Value is the measure of a firm’s capability to sell what it makes
for more than the costs incurred to make it. Therefore, strategy is the efforts of
managers to build and strengthen the company’s competitive position within its
industry in order to create value.
D. Creating Value
Companies create value either by making their products for a lower cost than
any other firm in their industry (the strategy of low-cost leadership) or making
those products that consumers are willing to pay a premium price for (the
strategy of differentiation).
1. Low-Cost Leadership. This strategy usually targets a broad market and
pushes a firm to sell its products either at average industry prices to earn a
higher profit than rivals or at lower than average prices in order to increase
market share. This strategy is a key advantage in highly competitive
industries. Cost leaders are well positioned to withstand price wars in the
industry.
2. Differentiation. This strategy requires the development of products that
offer unique attributes that are highly valued by customers and demand a
price premium. The uniqueness that companies generate must be difficult to
copy if the differentiation strategy is to be successful.
III. THE FIRM AS A VALUE CHAIN
Questions central to the task of creating value include how the company will design,
make, move, and sell products; how it will find efficiencies in doing so; and how it
will coordinate the decisions in one part of the business with those made in other
parts. Thinking of the firm as a value chain provides a strong tool to deal with these
challenges. The value chain is a representation of the firm as a series of discrete
value creating activities. The value chain has four organizing dimensions (see
Figure 11.4):
• Primary activities—those that are involved in the physical movement of raw
materials and finished products, the production of goods and services, marketing
and subsequent services of the outputs of the business.
• Support activities—include procurement, technology and system development,
human resource management, and firm infrastructure.
124
•
Profit margin—represents the ultimate purpose of the value chain which is to
result in more revenue generated by sales than the costs of the activities that led
to those sales.
• Upstream and downstream—upstream refers to those activities which gather
and process the inputs that the company uses to make a product while
downstream refers to those activities that deal more directly with the end
customer.
A. Using the Value Chain
A company’s competitiveness is determined by how effectively it manages its
value chain. Value chain analysis serves to guide managers’ efforts to build
expertise in those value activities that are critical to reducing costs or improving
differentiation. Configuration of the value chain refers to the process of
dispersing value chain activities to those locations around the globe where
perceived value is maximized or where the costs of value creation are
minimized. Coordination of the value chain describes the process of integrating
dispersed activities into a cohesive, coherent whole.
B. Configuration
Every MNE looks to establish elements of its value chain in the best spots in the
world. Location economies arise when MNEs locate activities in the optimal
location for that activity, wherever in the world that may be. Effective
configuration is difficult to achieve, however, due to the complexity and
dynamism of the international business environment. Conditions that shape how
managers configure value chains worldwide include cost factors, business
environments, cluster effects, logistics, degree of digitization, economies of
scale, and buyers’ needs.
1. Cost Factors. Differences in wage rates, worker productivity, inflation
rates, and government regulations create significant variations in production
costs from country to country. In 2003, the average hourly wage for
production workers in China was $.80 versus $25.34 in the United States.
2. Business Environment. Companies also configure their value chain to
take advantage of favorable business conditions such as lower tax rates,
more flexible operating requirements, and public policies or to avoid riskier
environments.
3. Cluster Effects. The cluster effect occurs when a particular industry
gradually clusters more and more related value creation activities in a
specific location. Examples of these clusters are Wall Street for global
finance, Silicone Valley for information technology, Hollywood for mass
media, Baden Wurttemberg for cars and electrical engineering, and Mumbai
for business process outsourcing.
4. Logistics. Refers to how companies obtain, produce, and exchange
material and services in the proper place and in proper quantities for the
proper value activity.
5. Degree of Digitization. The degree to which an analog product can be
converted into a digitized product influences value chain configurations.
Processes that were once rooted to a place can now be digitized and moved
easily and outsourced or offshored.
125
6. Economies of Scale. Economies of scale refers to the decrease in the
unit cost of production associated with the increase in total output. Scale
economies generally occur in industries with high capital costs and high
production volumes, allowing capital costs to be spread over many units of
production.
7. Customer Needs. The physical location of activities is often influenced
by a need to be close to buyers, especially such activities as distribution to
dealers, sales and advertising, and after sale service. Some companies
physically locate these capabilities in every country in which they operate.
DOES GEOGRAPHY MATTER?
Labor Costs and Location Decisions
AUTHOR: INFO NEEDED
C. Coordination
Coordination is the way that managers connect the discrete activities of the
value chain. The task of coordinating the different activities that go into making
and moving a product around the world has emerged as the basis of the superior
performance that separates good from great MNEs. As seen in the opening
case, Zara’s strategy of rapid response to ever-changing fashion trends demands
lots of coordination in order to succeed. MNEs often try to identify core
competencies, unique skills and/or knowledge that is better than that of its
competitors, and link these through different parts of the value chain. Examples
of core competencies include Procter & Gamble’s marketing and distribution
skills and R&D capabilities or Apple’s ability to convert innovative ideas into
well designed products. A core competency can emerge from various factors
such as:
• Product development
• Employee productivity
• Manufacturing expertise
• Marketing imagination
• Executive leadership
As a company’s value chain becomes more globally dispersed, the challenges of
coordination increase. Coordinated well, MNEs can leverage their core
competencies, using them to boost sales and profits. With poor coordination,
MNEs will not be able to transfer even more mundane capabilities and
resources from country to country. Several factors moderate managers’
analyses of how to coordinate value activities.
126
1. Operational Obstacles. Communication challenges resulting from the
need to synchronize languages and electronic interfaces can hinder the
efficient flow of materials and information. Differences in currencies and
measurement systems (i.e., metric vs. decimal) can also lead to breakdowns
in coordination.
2. National Cultures. The performance of even the simplest value chain
depends on each link meeting a specified timetable. Differences in cultural
perceptions of the importance of schedules and deadlines can wreak havoc
with tightly timed supply channels. Other conflicts revolving around
disagreements about how much and what types of information should be
shared with other units within the company and who should take lead
responsibility for certain activities are often culturally based and can result
in delays, misunderstandings, and inefficiencies.
3. Learning Effects. Learning effects refer to cost savings that come from
learning by doing. Managers learn through experience how to transfer best
practices from one country to another. Companies learn through experience
what approaches work best in different parts of the world. An MNE with a
factory in Mexico, for example, might adopt a traditional labor intensive
assembly line operation there while a similar operation in Japan may use
lean production systems. Differences in capital structures and productivity
present challenges of coordination that can only be overcome through
experiential learning.
4. Subsidiary Networks. The growing connectivity within and between
MNEs, as well as the growth in the number of companies operating
internationally, has resulted in an integrated market ecology where ideas can
emerge from and easily travel to subsidiaries around the world. Skills,
ideas, and technologies can be created anywhere within an MNEs global
network of subsidiaries. It is, therefore, becoming increasingly vital that
managers are able to identify new sources of value creation within the
subsidiary network and transfer them effectively to other parts of the
network where they can further enhance value creation.
D. Value Chains and Change
The configuration and coordination of a value chain responds to changes in
customers, competitors, industries, and environments. Because the features and
functions of products that consumers judge most critical change over time, the
basis of value creation in an industry evolves.
POINT—COUNTERPOINT:
Value Chains—Real or Virtual?
POINT: Value chain analysis has a long history. It was begun in the 1960s and 1970s as
a tool for industry planners looking to develop certain industries within a single nation. It
has since been adapted to the company level of analysis and is currently used as a
powerful concept that helps managers (1) evaluate the company’s strengths and
weaknesses (2) interpret the determinants of the internal cost structure, the basis of core
127
competencies, and relationships with customers and (3) link the internal features and
functions of a competitor to the content of its marketplace strategy. This use of the
model is rooted in an analysis of the real activities of the firm—the functions and
business processes the firm actually performs in moving a product from conception,
through its design, its sourced raw materials and intermediate inputs, its marketing, its
distribution, and its support to the end consumer. The tractable ideas of real value chains
better equip an MNE to deal with the enduring complications posed by geographic,
cultural, political, and economic distance between countries.
COUNTERPOINT: The recent emergence of the Internet has given rise to the
alternative idea of the virtual value chain as the basis of superior value creation and
competitive advantage. The internet creates a new basis for value creation through virtual
value networks, rather than through static, internally focused “chains”. Core
competencies can be leveraged more flexibly through new paths, letting managers rethink
how to capture the benefits of lower search, coordination, contracting, and other
transaction costs between people, agents, firms, and institutions. It then becomes
possible to outsource many value creating activities to other entities while still controlling
the overall process. The relative importance of a real versus virtual value chain depends
primarily on the characteristics of a particular company’s products and services.
IV. GLOBAL INTEGRATION VERSUS LOCAL RESPONSIVENESS
Global and local pressures challenge how the firm configures and coordinates its
value chain. On the one hand, firms must often respond to global competitive
pressures demanding efficiency and lower cost achieved through standardization and
scale economies. On the other hand, local competitive pressures place demands on
the firm to customize its products or services to meet distinctive needs country by
country. The strategic alternatives available to MNEs are often influenced by the
relative strength of pressures for global efficiency and local responsiveness.
A. Pressures for Global Integration
Global markets produce more than 20% of world output currently, and are
projected to increase to 80% of output by 2025. The trend toward rapid
economic integration appears poised to continue. Although many factors can
explain this trend, the two primary factors behind pressures for global
integration are the globalization of markets and the efficiency gains of
standardization.
B. Globalization of Markets
Global buying patterns and company strategies suggest that consumers seek and
accept standardized global products. Consumers are searching for products
which meet their needs and provide superior value, regardless of where they
originate. As communication and transportation infrastructures have become
more integrated across borders, consumer preferences have begun to
homogenize and companies’ abilities to meet those preferences on a global scale
have increased. The resulting economies of scale translate to even lower prices,
higher quality standardized goods, and yet more homogenization of consumer
128
demand. More and more goods are being viewed as commodities—traded on
the basis of price, not on differences in quality or features. In global markets,
product differentiation is difficult and competition tends toward price wars.
C. Efficiency Gains of Standardization
Standardization is the process of increasing the uniformity of a product or
service by decreasing the extent of variation. Worldwide standardization of an
MNE’s products, purchases, methods, and policies can significantly reduce the
costs of its operations. Standardization is also a powerful means to exploit
location economies, since value chain activities can be placed in optimal
locations for global production and distribution. Standardization pressures have
steadily increased as more countries have joined the global economy in general
and the WTO in particular.
D. Pressures for Local Responsiveness
Consumer divergence and host-government policies are two of the major forces
contributing to pressures for local responsiveness.
1. Consumer Divergence. Contrary to the globalization of markets thesis,
some argue that differences in consumer tastes and preferences across
countries emerge and endure due to cultural predisposition, historical
legacy, emergent nationalism, economic prosperity, and other factors. In
some industries, like food production, products are unsuitable for
standardization and local preferences remain strong.
2. Host-Government Policies. Differences in policies among hostcountry governments contribute to great variability in political, legal, and
economic situations in various markets. Policies such as trade
protectionism, local content rules, and national product standards require
some degree of local responsiveness and counterbalance the policy shifts
toward privatization, economic freedom, legal uniformity, and deregulation
that encourage standardization.
E. Interaction. Pressures for global integration and local responsiveness interact
as expressed in the integration-responsiveness grid (Figure 11.5). This grid
expresses how a company’s choice of strategy is a function of the particular
relationship the company sees between its idea of value creation and the
corresponding pressures for global integration or local responsiveness in its
industry.
V. STRATEGY TYPES
Generally, MNEs choose from four basic strategies to guide how they will enter and
compete in the international environment (Figure 11.6). These strategies correspond
to the relative demands for global integration and national responsiveness and
include the international, multidomestic, global, and transnational strategies.
A. International Strategy. The international strategy emphasizes the transfer of
core competencies from the domestic operation to foreign subsidiaries. It allows
for limited local customization. Examples of companies using this strategy
include McDonald’s, Kellogg, Yahoo!, Wal-Mart, and Microsoft. Many critical
activities, such as research and development or branding, are usually centralized
at headquarters. Some subsidiaries may have latitude to adapt products to local
129
conditions, but ultimate control resides in the home office. An international
strategy makes sense if a firm has a core competence that local competitors in
other markets lack and if industry conditions do not push the firm to improve its
cost controls or local responsiveness. The liability of the international strategy
is that headquarters’ central role hinders identifying and responding to local
conditions and can lead to missed market opportunities.
B. Multidomestic Strategy. Firms following a multidomestic strategy adjust
products, services, and business practices to meet the needs of individual
countries and regions. Management that chooses the multidomestic strategy
believes in responding to the unique conditions prevailing in different markets.
This strategy makes sense when the demands for local responsiveness are high
and the demands for global integration are low, but there are high costs. The
multidomestic strategy leads to widespread duplication of management, design,
production, and marketing activities since each local subsidiary must perform
each of these activities. Corporate headquarters may have a harder time
controlling more independent subsidiaries.
C. Global Strategy. A global strategy requires worldwide consistency and
standardization in order to be effective. Firms that choose the global strategy
face strong pressures for cost reductions but weak pressure for local
responsiveness. Operationally, MNEs that adopt a global strategy usually are or
aim to become the low-cost player in their industry. This generally requires
global-scale production facilities in a few low-cost locations. R&D, production,
and marketing activities are also concentrated in the most favorable locations,
which may not all be in the same country. Dispersed activities are coordinated
by formal linkages, overseen by executives at the centralized world headquarters
who standardize practices and processes. Strategic decision making authority
resides almost exclusively at headquarters.
D. Transnational Strategy. This strategy aims to simultaneously exploit
location economies, leverage core competencies, and pay attention to local
responsiveness. It is arguably the most direct response to the growing
globalization of business. Capabilities and contributions are differentiated from
country to country, with an emphasis on learning from various environments and
then integrating and diffusing this knowledge throughout global operations.
Rather than a top-down (global strategy) or bottom-up (multidomestic strategy)
flow of ideas, the transnational strategy champions a flow from the idea
generator to idea adopters wherever these may be.
LOOKING TO THE FUTURE: New Strategy Types?
The changing nature of technologies and regulations that has led to a more globalized
business environment has also led to a greater diversity of firms and strategies. In the
future, the business world is likely to be populated by a variety of local firms, regional
firms, firms that operate in a few countries, firms that operate in many countries,
centralized firms, and networks of firms. Questions about the co-location of different
places with different types of firms means strategy will emerge from the interplay among
130
firms and places. One possibility is the emergence of the “metanational” as a new type of
global corporation that thrives on the process of seeking out uniqueness that it might
exploit elsewhere or that might complement its own existing operations. This type of
company would build competitive advantage by uncovering and transferring knowledge
from many locations around the world. The metanational’s value chain would be based
on three core competencies—the capability to prospect for and access untapped pockets
of technology and emerging consumer trends from around the world, to leverage
knowledge scattered throughout its local subsidiaries, and to mobilize this fragmented
knowledge to generate innovations that produce, market, and deliver value on a global
scale.
Another emerging organizational form is the cybercorp, a company that operates
exclusively in cyberspace and is not impacted by the physical geography of lines on a
map. Strategically, the cybercorp looks to develop competences that make it ready to
react in real time to changes in its customers, competition, industry, and environment.
The cybercorp will be built for speed, emphasizing the ability to learn, evolve, and
transform in a rapidly changing virtual environment. Whatever new organizational forms
and strategies emerge in the future will likely be also firmly rooted in the past. No
successful firm can abandon the traditional principles of superior value creation, superb
core competencies, and bright management who can articulate clear visions and practical
goals consistent with the real and virtual context.
CLOSING CASE: The Globalization of eBay
eBay was founded in 1995 and has expanded rapidly in the United States and around the
world (see Table 11.1) with net revenues of $3.2 billion and gross margins of 81% in
2004. eBay is a Web-based forum that provides an efficient market for buyers and sellers
of products that typically don’t have an efficient distribution system because of either
information or price inefficiencies. The company is really nothing more than an
intermediary software program linking buyers and sellers, charging listing fees, payment
fees, and final value fees to its sellers. After establishing a strong base in the United
States, eBay has aggressively pushed the idea of global expansion and has developed or
acquired local on-line auction sites in more than 20 countries. Overseas markets are seen
as having tremendous growth potential, but they do present a number of challenges.
Language differences, the lack of widespread Internet access in many countries, cultural
attitudes about e-commerce, and government regulations all pose significant obstacles to
eBay’s expansion plans. Furthermore, as eBay has rushed to globalize, it has spent large
sums to acquire and develop foreign operations without strong prospects for immediate
returns. eBay sees these moves as part of a long term strategy, however, and believes
that future growth will justify current investments. The company’s lofty vision,
according to CEO Meg Whitman, is to “transform countries and cities and villages and
empower people to make a living in ways they could not before” and to create “new trade
on a global basis that the world has never seen.” Whether the company can realize this
vision remains to be seen, but it is clear that eBay has already had a transformative effect
131
on markets for many products in many countries that is only likely to intensify in the
future.
Questions
1.
What is eBay’s core competency? How does it relate to their chosen strategy?
eBay’s core competency is in developing and improving software and digital
infrastructure tools that lead to the creation of a safe, secure, information-rich on-line
trading community. The company’s strategy is to allow users to innovate using the
tools that it provides, regardless of what they are buying or selling or where they are
buying or selling it.
2.
How would you explain how eBay has decided to configure and coordinate its value
chain?
eBay has a very lean value chain, providing only the tools to make transactions
possible and letting users do the work of managing transactions. The core
technologies eBay uses are centralized, but because of the need to confine shipping
of goods to shorter distances, the need to conduct many transactions in local
currencies, and the need to list product descriptions in local languages, eBay has
decentralized its value chain configuration by developing largely independent
country subsidiaries as well. The company’s vision may be one of seamless global
commerce, but the reality is often one of more isolated single country marketplaces.
3.
Would you characterize eBay’s value chain as virtual or real? Why?
Most of eBay’s value chain is virtual, due to the fact that the company doesn’t ever
actually handle any of the products that are sold on its sites. eBay’s entire objective,
in fact, is to create a safe and secure virtual community through which tangible
products can be traded by users. eBay’s role in the process is to stimulate, maintain,
and strengthen the virtual ties created by users that lead to the real exchange of
goods.
4.
Consider again your description of eBay’s strategy. Is it different from what it was
ten years ago? Why?
eBay’s fundamental strategy has not changed in the last 10 years. The only thing
that has changed is the scale on which that strategy is implemented. eBay has
expanded its presence within its core market, the United States, and broadened its
operations to a host of other countries as well. The nature of eBay’s competitive
advantage and the processes the company uses to establish and defend those
advantages have not changed significantly.
5.
What implications to the challenges identified in the case have for eBay’s strategy—
today and in the future?
The key challenge facing eBay is how to expand both regionally and globally. There
is a natural tension between responding to local conditions by making things easier
for users in their own country and creating a centralized global marketplace. eBay
132
needs to focus on developing more tools that allow sellers in one country to
seamlessly interact with buyers in many other countries. This would include further
development of automatic translation software and refinements to payment systems
that would automatically convert payments from the buyer’s currency to that of the
seller. An even more difficult prospect is how to deal with differences in
government regulations across countries. eBay has tried to avoid policing its site for
activities that violate local rules and instead has chosen to issue disclaimers and rely
exclusively on its sellers to abide by local rules. In a more globalized on-line
community, it will become increasingly complex for sellers to understand and follow
the wide variety of government regulations that might apply to their circumstances.
To continue expansion, eBay will likely have to also develop tools and invest
significant resources to help sellers navigate these difficult issues.
WEB CONNECTION
Teaching Tip: Visit www.prenhall.com/daniels for additional information and links
relating to the topics presented in Chapter Eleven. Be sure to refer your students to the
online study guide, as well as the Internet exercises for Chapter Eleven.
_________________________
CHAPTER TERMINOLOGY:
value, p. 380
strategy, p. 380
value chain, p. 381
_________________________
economies of scale, p. 384
core competency, p. 387
ADDITIONAL EXERCISES: The Strategy of International Business
Exercise 11.1. Have the students perform a value chain analysis on Zara. Which
of Zara’s value chain activities create the most value for the company? What are
Zara’s core competencies?
Exercise 11.2. Ask the students to use the five fundamental forces model (Fig.
11.3) to analyze one of the industries listed in the integration-responsiveness grid
(Fig. 11.5). Does the pressure for local responsiveness and/or global integration
impact the five forces in the industry they selected?
Exercise 11.3. Have the students refer to the Fortune Global 500
(http://money.cnn.com/magazines/fortune/global500/). Categorize each of the top
five global firms in terms of strategy types (Fig. 11.6). Ask the students to specify
what information they would need to make an informed judgment on strategy type
for any given company. Have them identify sources for that information.
133
Exercise 11.4. Select two large multinational enterprises that are known to the
students, one consumer-oriented (e.g., Toyota) and one industrial (e.g., BASF).
Then ask students to discuss the pressures for local responsiveness and global
integration faced by each firm. Which experiences the greater pull toward local
responsiveness? Why? Which faces a greater need for global standardization?
Why?
134