Global Strategy
gy for the 21st Centuryy – The
RAT/CAT Capabilities Perspective
Donald Lessard
Epoch Foundation Professor of International Management
MIT Sloan School of Management
HKU
February 16, 2012
Why do firms internationalize?
•
•
•
•
Because
they are out of space at home
x
x
Because “foreign”
markets are growing faster
Because everybody else is doing it ?
g firms are threatening
g them at
Because foreign
home ?
• Because they are good at something that
“travels” probably
• Because the industry/game is global in scope
probably
Capabilities and Competitive Advantage
• In order for capabilities to “matter”
matter , they must provide a
competitive advantage.
• To do this
this, they must satisfy four criteria (VRIO):
– they must create value in the form of greater
willingness to pay by customers for the product or
service and/or reduce the cost of producing/supplying
that product or service,
– they must be rare,
– theyy must be hard to imitate.
– The organization must be able to employ them
effectively.
•
Source Barney (1997), Barney and Clark (2007).
Capability Exploiting Internationalization
• What capabilities do we have that we seeking to
exploit
l it internationally?
i t
ti
ll ?
• Do they pass the RATs test wrt target country:
– Are
A they
th Relevant?
R l
t?
– Are they Appropriable?
– Are they
h Transferable?
f bl
Exploit
Home-based
resources//
capabilities
Foreign
market
Position/
customer v. p.
Capability Enhancing Internationalization
• What competencies might we tap/develop in a particular
target country?
pp y the CATs test:
• Apply
– Are they Complementary?
– Are they Appropriable?
– Are they Transferable?
Internationallyderived
Resources/
Capabilities
Augmented
capabilities
Enhance
The Full Cycle
Exploit
Existing
resources/
capabilities
Augmented
Resources/
Capabilities
RAT
CAT
Enhance
Target
country vp
Target country
Target-country
derived
Resources/
Capabilities
p
Examples
• Shimano
• Cemex
• Global Clean Tech
1980s
Recall
R
1970s
Keizo S. dies
K
SPD
S
1960s
Euro racing
1950s
Offshoring
1940s
3 speed hub, C
Company
begin exports tto US,
accesses technology in
US
1930s
Founders death
1920s
Company reesttablished
after war
Rise of China, In
R
ndia
SRAM suit
S
Eu
uropeans “reinve
ent”
biccycling
Do
ownhill emergess
in
n US
O embargo/
Oil
Nixon shock
N
PRC
P
WWII
W
Japan expands in Asia
Major external events
Company exp
pands in
Asia
Company founded
Shimano timeline
2000s
1990s
2010s
Major company events
Capability “Exploiting”
Exploiting Episodes
Exploit
Home-based
resources/
capabilities
•
•
•
•
Foreign
F
i
market
Position/
customer v. p.
Expansion
pa s o to a
all Japa
Japan
Expansion throughout Asia in 1930s
Expansion to US in 50s,
50s Europe in 60s
To “new economies” in 1980s
Competency Enhancing Episodes
Internationallyy
derived
Resources/
Capabilities
Home-based
Home
based
resources/
capabilities
Enhance
•
•
•
•
Rats
Platform
No
Yes
Yes
No
Cold Forging
g g from MA
Off shoring to Singapore, China
“Tapping”
pp g road racing
g demand conditions in Europe
p
“Tapping” mountain biking demand conditions in US
Virtual diamond: Shimano
Cold forging tech
in the US
US
Rivalry
(Mountain bike)
Demand
Conditions
Factor conditions
Low cost
manufacturing in
East Asia
Europe
(Road bike)
Related &
Supporting
Industries
US
(Mountain bike)
Process of Growth & International Expansion
1900
1970
1970s
1980s
1990s
06 Founded
31 Cementos Portland and
Cementos Mexicanos Merged
70s National Via Acquis.
76 Lists on the Mexican St. Ex.
82 Debt Crisis / Exports Program
Zambrano in Divest non-core – bulk up
89 Holderbank  Apasco
90US Anti Dumping
TOLTECA, MX (1989)
SPAIN (1992)
PANAMA (1994)
VENEZUELA (1994)
TEXAS (1994)
DOMINICAN REPUBLIC (1995)
COLOMBIA (1996)
PHILIPPINES (1997)
INDONESIA (1998)
99 NYSE Listing
EGYPT (1999)
COSTA RICA (1999)
00 S&P Investment Grade
SOUTHDOWN, USA (2000)
2000s
FRANCE (2001)
PUERTO RICO (2002)
RMC, UK (2005)
BANGLADESH (2000)
THAILAND (2001)
Stepping
pp g Out
Operations Expertise
Exploit
Internationallyderived
Resources/
C
Capabilities
biliti
Home-based
resources/
capabilities
Enhance
Cost of Capital,
PMI Process
Pet Coke
Growing
g up
p
Operations Expertise
PMI
“
“Branded
d d bags”
b ”
Exploit
Internationally
Internationallyderived
Resources/
Capabilities
Home-based
H
b d
resources/
capabilities
Enhance
Pooling
PMI on Mexico
Th CEMEX Way
The
W
Stepping
pp g Up
p
Operations Expertise
PMI
GPS
CEMEX Way
Exploit
Internationallyderived
Resources/
Capabilities
Home-based
resources/
capabilities
E h
Enhance
Concrete
“Slump meter”
R
Resource
e/capabiility base
e
Home ba
H
ased HB+ Me
etanation
nal*
How RATs and CATs Multiply!
Home
Footprint
*see Doz, Williamson, and Santos
Global
Questions ?
References
•
D
Doz,
Willi
Williamson and
dS
Santos,
t
"I
"Is Y
Your IInnovation
ti P
Process Gl
Global?"
b l?" MIT
Sloan Management Review: 31-37. 2004.
•
Ghemawat, Redefining Global Strategy: Crossing Borders in a World Where
Differences Still Matter, Harvard Business School Press, 2007.
•
Lessard and Lucea, “Mexican Multinationals: Insights from Cemex,” in
Ramamurti and Singh (eds.) Emerging Multinationals from Emerging
Markets, (Cambridge University Press, 2008).
•
Lessard, Lucea, and Vives, ”Global Strategy for the 21st Century – The
RAT/CAT Capabilities Perspective
Perspective”, unpublished working paper,
paper February,
February
2012
•
•
dlessard@mit.edu
dl
d@ it d
http://dlessard.scripts.mit.edu