TODAY

Globalization Drivers

Globalization vs. Localization

Global vs. Multi-domestic Strategies

International Strategy: Value Chain Perspective

Canada Solar Case Study – Strategic Framing

Finalize 5 minute pitches

Make 5 minute pitches

GLOBALIZATION DRIVERS

Market Drivers

Cost Drivers

Government Drivers

Competitive Drivers
Low
Multidomestic
High
Global

GLOBALIZATION DRIVERS
High
Strength of Market
Drivers
Aircraft
Computers
Automobiles
Soft Drinks
Toothpaste
Retail Banking
Book Publishing
Baked Goods
Low
Multi-domestic Global
High

GLOBALIZATION DRIVERS
High
Strength of Cost
Drivers
Low
Pharmaceuticals
Aircraft
Computers
Automobiles
Toothpaste
Retail Banking
Baked Goods
Soft Drinks
Multi-domestic Global
High

GLOBALIZATION VS. LOCALIZATION


Globalization :

Operating with relative constancy in a number of markets -- as if the entire world (or major regions of it) were a single entity; selling the same things in the same way everywhere (Levitt 1983)

Examples?
Localization :


Operating in a number of countries, adjusting products and practices in each -- at a high relative cost, with a committed operating presence in the markets of other nations.
Examples?

GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat)

Most of modern global strategy focuses on minimizing differences

But, correctly choosing how much to adapt a business model is important to extract full value from a business

Employ a strategy of differences ( arbitrage ) and exploitation of scale economies

GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat)

Strategy of differences: arbitrage

Cultural Arbitrage: Exploiting of culture to gain advantage. Ex: food, clothing, US fast-food chains

Administrative Arbitrage: Exploiting legal, institutional and political differences from country to country. (ex: tax differentials)

GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat)

Strategy of differences: arbitrage (cont)

Geographic Arbitrage: Not as important now due to reductions in transportation costs, but can be used in areas such as telecommunications (local vs. long-distance) and distribution networks

Economic Arbitrage Includes exploitation of differences in costs of labor and capital, variations in knowledge or availability of complementary products, technologies or infrastructure

GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat)

Globalization allows for:
 focus on market similarities
 upward spiraling of market share, leading to greater economies of scale
 lower costs through greater economies of scale
 lower prices for consumers

GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat)

Localization allows for:
 winning specific buyers and maximizing sales
 not over-designing products for some countries and under-designing them for others
 not undermining some company networks which already exist
 not dampening entrepreneurial spirit

GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Global Strategies
•System-wide approach to competing worldwide
• Mutually interdependent subsidiaries
• Centralized control and reporting of activities
• Facilitates cross-subsidization policies across markets
Slide 8-
12

GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Global Strategies


Standard products
Global economies of scale in key components and activities



Leverage technology across many markets
Global coordination of marketing and sales system-wide
Cross-subsidization policies to respond to competitive moves by other global strategy firms
Slide 8-
13

GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Multi-Domestic Strategies
•Competitive advantage is built in each separate national or regional market.
• Markets and subunits are treated independently from one another.
• Decentralized controls of activities, reporting back to headquarters.
Slide 8-
14

GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Multi-Domestic Strategies

Customization or frequent adaptation of

 products for each separate market
Few systemwide opportunities for economies of scale
Value-adding activities performed and

 duplicated in each market
Coordination of marketing and sales within each market
Quality and image across markets are important sources of competitive advantage
Slide 8-
15

GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Benefits of Global Strategies

Market growth and expansion opportunities

Recovery of R&D and investment costs

Creation of a distinct image

Accelerated learning and transfer of new skills
Slide 8-
16

GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Costs of Global Strategies

Strategic Leverage
•
•
Sustained investment required
Preserving and extending image


(In)Flexibility
•
•
High interdependence of subsidiaries (and businesses)
Change or development affecting all markets
Cooperation
•
Compromise
•
Accountability
Slide 8-
17

GLOBAL V. MULTI-DOMESTIC
STRATEGIES
High
Low
Low
High
Pressures for Local Responsiveness

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Infrastructure
Technology Development
Procurement
Human Resource Management
Inbound
Logistics Operations
Outbound
Logistics
Marketing Service
Profit
Margin

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management
Inbound
Logistics
Operations
Outbound
Logistics
Marketing Service
Profit
Margin

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management
Inbound
Logistics
Operations
Outbound
Logistics
Marketing Service
Profit
Margin
Upstream

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management
Inbound
Logistics
Operations
Outbound
Logistics
Marketing Service
Profit
Margin
Upstream Downstream

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Infrastructure
Technology Development
Procurement
Human Resource Management
Inbound
Logistics
Operations
Outbound
Logistics
Marketing Service
Profit
Margin
Advertising Pricing Distrib.
Packaging

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE


Concentrated/centralized vs. dispersed/decentralized

Decision on modes of entry into new country markets (Class 5)

INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE

Cross-border linkages between dispersed value-creating units

Coordination = Flows of:

$

Product (finished and intermediate)

Technology

People

Information (market data, strategic direction, etc.)

Highly coordinated vs. only money flows

CASE STUDY: CANADA SOLAR




What are the key market and cost drivers in this industry?
What arbitrage opportunities, if any, exist in this industry and, specifically, for Canada Solar?
To what extent are there tensions between globalization and localization for Canada Solar as it consider international expansion of its manufacturing?
Create a “Pressures” matrix that characterizes where
Canada Solar and your target company reside.

5 MINUTE PITCH

Preparation

Cluster Assessment + “Fit-1” (Solar PV Mfg and
Qatar)

1.5 page outline plus presentation

No longer than 5 minutes

Three “C’s”: Concise, Clear, Contextual