FOUNDATIONS OF STRATEGY
CHAPTER 8
GLOBAL STRATEGIES & MULTINATIONAL
CORPORATIONS
Team 5
Micah Decuire, Kendra Kimberlin, Dylan Blase,
Skylar Bogle and Daniel Uribe
Introduction and Objectives
• August 2011, started with many international stock exchange market such as the London
FTSE, Dow Jones, and Germany DAX experiencing declining rates.
• The main cause; Spain and Italy.
• Since countries rely on each for import/exports, various markets can be suffer the
consequences when one struggles.
• Internationalisation
• Internationalisation is the most important and persuasive force that has reshaped the
competitive environment in the past half-century, and has been an expanding
Case Study: IKEA
• IKEA is one of the world’s largest furniture manufacturer and retailers
• Founder, Ingvar Kamprad, started selling various items until he decided to specialize in
furniture.
• Later Kamprad moved production away from Sweden to Poland
Case Study: IKEA
• Patterns of Internationalisation
• Challenges entering the United States
• From here IKEA realized the need to change and adapt their products and
management to better the area they were operating in.
Patterns of Internationalisation
• Occurs with manly with Trade and Direct Investment
• Sheltered Industries
• Trading Industries
• Multidomestic Industries
• Global Industries
Analysing competitive advantage in an international
Context
•
Changes in competitive positions of companies has created shifts in the growth of
international competition in the last 20 years.
• 1989 US Steel was the world's biggest steel company,
• ArcelorMittal became the new global giant in 2009.
• 1989 IBM, Compaq and Apple were the world market leaders in PCs
• 2009 Hewlett-Packard and Acer were the new brand leaders
Competitive advantage in an international
context
Firms Resources and
Capabilities
● Financial
resources
● Physical
resources
● Technology
● Reputation
● Functional
Capabilities
● General
Management
Capabilities
The Industry Environment
Key Success Factors
Competitive
Advantage
●
●
●
●
●
The National Environment
National resources and capabilities (raw materials;
national culture; human resources; transportation;
communication; and legal infrastructure)
Domestic market conditions
Government policies
Exchange rates
Related and supporting industries
National influences on competitiveness: comparative
advantage
• Comparative Advantage Theory: A country has a comparative advantage in those products
that make intensive use of those resources available in abundance within that country.
• Abundance In
• Bangladesh - unskilled labour
• US- Technological resources: trained scientist and engineers, research facilities
and universities
• Comparative Advantage
• Bangladesh- products that make intensive use of unskilled labour; clothing,
handicrafts, leather goods and assembly of consumer electronic products.
• US- technology-intensive products; microprocessors, computer software,
pharmaceuticals, medical diagnostic equipment and management consulting
services.
Comparative Advantage cont.
• Relative efficiencies of producing different products.
• Trade theory: initial
• Natural resource endowments
• Labour supply
• Capital stock
• Trade theory: present
• Central role of knowledge (technology, human skills and management capability)
• Resources needed to commercialise knowledge (capital markets,
communications facilities, and a legal system)
Porter’s national diamond
Examined the dynamics through which particular industries within a country develop the
resources and capabilities that confer international competitive advantage.
Identifies four key factors which determine a country’s competitive advantage within a
particular sector.
Key Factors
• Factor Conditions
• Highly specialised resources with many ‘home-grown’ rather than ‘endowed’
• Related and Supporting Industries
• Clusters of industries
• Demand Conditions
• In the domestic market provide primary driver of innovation and quality
improvement
• Strategy, Structure, and Rivalry
• Role of intense domestic competition in driving innovation, efficiency and the
upgrading of competitive advantage.
Consistency between strategy and national conditions
Establishing competitive advantage in global industries requires congruence between business
strategy and the pattern of the country’s comparative advantage.
Limitation of the diamond model
• First Perspective: Rugman and Dunning
• omitting key factors.
• Needs to be expanded and amended.
• Rugman and D’Cruz propose ‘double diamond’ framework.
• Second Perspective: Waverman
• is so general it lacks value.
• Trying to explain all aspects of trade and competition the model ends up explaining
nothing because it is insufficiently precise to generate testable predictions.
Applying the Framework:
International Location of Production
How national resource conditions influence international strategies:
1. Where to locate production activities.
1. How to enter a foreign market.
Where to Locate Production
1. National resource availability
1. Firm specific competitive advantages
1. Tradability
1. Political Considerations
Location of the Value Chain
● Production of most goods and services comprises a vertical chain of
activities where the input requirements of each stage vary considerably.
● Different countries offer advantages at different stages of the value chain
● Resource availability and cost best match each stage
● Efficiency
How Should a Firm Enter Foreign Markets?
● Enter in pursuit of profitability
● Profitability depends on:
o Attractiveness of that market
o Competitive advantage within the market
Five Key Factors Relevant to Market Entry
● Competitive Advantage
● Tradability of Product & Barriers of Trade
● Range of Resources and Capabilities
● Directly Appropriating Returns on Resources
● Transaction Costs
Benefits of a global strategy
•
•
•
•
•
Cost benefits of scale of economies
Serving global customers
Arbitrage benefits
Learning benefits
Competing strategically
National Differentiation
Global Integration vs National Differentiation
Globalized
• Certificates of deposit
• IT
• Manufacturing
• Research and Development
• Purchasing
Nationalized
• Current accounts
• Mortgage lending
• Sales
• Marketing
• Human research development
• Customer service
STRATEGY & ORGANIZATION WITHIN THE
MULTINATIONAL CORPORATION
•
Multinational Companies and the stages of history
• European multinational
• Post World War II
• Japanese Challenge
•
Application to Wells Fargo…
RECONFIGURING THE MULTINATIONAL CORPORATIONS: THE
TRANSNATIONAL CORPORATION
• Organization Structure
• Localization and Global integration
• R&D for New Product development
WELLS FARGO INTERNATIONAL LOCATIONS
https://www.wellsfargo.com/com/international/locations/global-financial-institutions/
CLOSING CASE: SHARP’S PRODUCTION OF LCD’S
•
LCD is the abbreviation for liquid crystal displays that was an up and coming technology. Sharp
was the involved in the development of this technology in the sixties, but because of the cost
was unfeasible at that time the technology was stalled.
•
In the early 2000’s LCD’s took over the electronic world. However because of the competition
the company decided to keep production close in Japan to maintain the intellectual property.
Beyond the Case
•
Throughout time there was a need to grow past it’s Japanese roots and thus Sharp had to
internationalize. Therefore the company expanded to other locations , but as a result they were
poorly prepared and suffered losses. Still the company endures and continues to pursue
international ties.
CHAPTER 8 SUMMARY
•
This chapter boiled down to the basics is essentially going over ways to make the process of
internationalization easier to manage and focus on the small changes that will be needed to
make the large culture of the company stay intact.
•
There are so many factors that have to be accounted for in this process: patterns of
internationalization, analysis of competitive advantages, formulation of strategies for basic
business practices, as well as the strategies for the cultural aspects to make sure that everyone
is one the same page.