Strategy & International Business Examination – June 2001
Answer any three questions
1. “Changes in the international operating environment have forced MNCs to
optimise global efficiency, national responsiveness and world-wide learning
simultaneously. For most companies, this new challenge implies not only a
fundamental strategic reorientation, but also a major change in
organisational capability.”
C Bartlett & S Goshal, “Transnational Management”,
in B De Wit & R Meyer, Strategy: Process Content Context, 1998
Outline and illustrate how companies can go about building the strategic
capabilities necessary to meet the challenges of globalisation as indicated in
the quotation above.
This question concentrates upon the strategic implications of globalisation, focusing
particularly upon the work of Bartlett and Ghoshal related to transnational
corporations.
In answering this question you could use frameworks such as those developed by
Bartlett and Ghoshal (structural types), Prahalad and Doz (the integration responsiveness grid) or Yip (drivers of globalisation), to highlight the competing
pressures of globalisation. The frameworks should be clearly outlined and illustrated.
In particular, the question requires you to focus closely on the strategic/organisational
response implied by Bartlett and Ghoshal’s transnational corporation structure – in
terms of global functional management, global business management and geographic
market management. The complexities and difficulties should be explored. An
outline of the different organisational types outlined by Bartlett and Ghoshal, together
with their benefits/limitations could be used to suggest why the transnational
(network) structure is sought.
2.
“Clusters represent a new way of thinking about location, challenging much
of the conventional wisdom about how companies should be configured, how
institutions such as universities can contribute to competitive success, and
how governments can promote economic development and prosperity.”
M E Porter, “Clusters and the New Economics of Competition”,
HBR, Nov-Dec 1998
In a world of increasingly global corporations, how can policies that focus
upon the development of industrial clusters assist in promoting the
competitive success of regions like the North East of England?
Another run over Porter’s Diamond – but this time from a public policy perspective.
At the heart of this question lies a paradox that is identified by Porter – the growing
importance of regions in an era of globalisation. He bases his argument upon the
(continued) existence of industrial clusters even in the most modern of industries.
Why should this be so? Porter’s argument is based on the Diamond – with
geographic proximity of the players acting as an amplification mechanism in the
process of innovation driven by the Diamond’s elements (factor conditions, demand
conditions etc.).
If this is the case, and the critique based on a different view of the global corporation,
(see Reich, Ohmae et al) could usefully be explored, then this has implications for
public policy. Certainly, industrial and regional policy in the UK has been explicitly
“Porterian” since the Competitiveness White Paper of 1998. Policy focuses around
cluster formation and development, both nationally but importantly regionally. The
RDAs in England, along with the Scottish Enterprise and the WDA, are seen as the
mechanism through which the issue of competitiveness is addressed.
An additional angle is to explore briefly how this move towards regionalism has
constitutional, political and cultural influences as well. The RDAs are a key element
in the moves towards increasing devolution across the UK.
3. “One research study of international strategic alliances confirmed that the
primary motivation to form alliances was the need for specific resources and
competences to survive and succeed in globalising markets – particularly
where technologies were changing too.”
“International developments through acquisition have been critically
important in some industries… [One] reason for acquisition is the lack of
resources or competences to develop a strategy internally.”
G Johnson & K Scholes, Exploring Corporate Strategy, 5th ed. 1999
Compare and evaluate the reasons for the use of acquisitions and strategic
alliances by organisations in order to develop the strategic capabilities
necessary to survive and succeed in global markets. Use relevant examples to
illustrate your answer.
See Tutorial 3 for comments on this
4. “Few individuals have sufficient power to determine unilaterally the strategy
of an organisation. Influence is likely to occur only because individuals share
expectations with others by being part of a stakeholder group.”
G Johnson & K Scholes, Exploring Corporate Strategy, 5th ed. 1999
How can an understanding of the power and influence exerted by particular
stakeholder groups help the strategist manage the process of strategy
development within an organisation?
This question requires the you to show how stakeholders and stakeholder analysis can
play a part within the strategy process. The political nature of the process needs to be
recognised as well as its contextual dependence – stakeholders may adopt different
positions depending upon the specific issue. You need to show how the strategist can
manage this process by managing the relationships with and between these groups, as
well as paying attention to their sources of power and influence, so manoeuvring the
stakeholders across the map to achieve a favourable outcome.
You should outline and apply the various elements of stakeholder analysis and
mapping, perhaps with reference to a particular example. You should stress the
evaluation of the significance of particular stakeholder groups and how they
have/might influence strategy and in what directions.
5. “Competitive advantage ultimately results from an effective combination of
national circumstance and company strategy. Conditions in a nation may
create an environment in which firms can attain international competitive
advantage, but it is up to a company to seize the opportunity”
M E Porter, The Competitive Advantage of Nations,
in B De Wit & R Meyer, Strategy: Process Content Context, 2nd ed.,1998
Critically assess Porter’s view about the importance of both national
conditions and company strategy in order for a firm to create international
competitive advantage.
A question about Porter’s Competitive Diamond and the implications for the
competitive strategies of organisations. A critique can be developed from alternative
views of the global/transnational corporation (e.g. Levitt, Reich or Ohmae).
Innovation lies at the heart of this question. Porter argues that innovative conditions
are frequently more favourable in specific locations - often associated with industrial
clusters. Companies exposed to these conditions that encourage and support
innovation are likely to develop global competitive advantage over those companies
located elsewhere.
One conclusion might be that nationality is now less of a significant factor, though
this can be disputed but, argues Porter, location is still critical in many, even new,
industries, otherwise it is difficult to explain away industrial clusters. If location can
still confer competitive advantage, then the implications for company strategies are
significant: key activities within the corporation, even a full product division, need to
be located within the cluster in order to exploit advantage, or reduce disadvantage as a
result of location outside of the cluster. This goes beyond location decisions taken by
global companies on the bases of closeness to customers or labour cost advantage.
6. “Many corporate parent companies destroy value. Businesses in corporate
portfolios would, often, be better off as independent companies or as part of
other corporate portfolios.”
A Campbell, M Goold & M Alexander “The Value of the Parent Company”,
in B De Wit & R Meyer, Strategy: Process Content Context, 1998
How is a corporation’s approach to the management of synergy likely to
affect its view of what it can offer as a parent to the businesses within it? Use
examples to illustrate your answer.
This question is based mainly upon the concept of parenting advantage but invites the
student to explore the wider implications of this for diversification and the
management of synergy within multi-business organisations.
You should be able to outline and apply Goold and Campbell’s “parenting matrix”,
perhaps illustrating it by reference to a particular corporation. Underlying the
framework is the view that the corporate parent needs to look beyond a matching of
the needs and capabilities of the business units and the parent, to identify whether the
parent is the best available for each business unit. The framework classifies business
units as heartland, ballast, value trap and alien: with decisions on the composition of
the portfolio taken in the light of this analysis.
Then you need to explore the underlying rationale of Campbell, Goold and
Alexander’s approach as indicated in the quotation. Yes, firms need to consider the
future of alien and value trap businesses within the particular portfolio, but recognise
that the capabilities and vision of both the parent and the business units will determine
the positions on the map and any consequent actions.
A particular link that needs to be explored is implications of parenting for the extent
of diversification within the corporation. The view taken of the individual SBUs will
depend upon the corporation’s view of itself and how it creates value – a corporate
centre that adopts a financial control/portfolio management logic will view its
contribution to and expectations of particular SBUs differently to a corporate centre
adopting a strategic planning/core competences logic. The extent of diversification in
terms of product/market/competences is likely to be greater in the former than the
latter. In other words, positions of SBUs on the parenting map will vary according to
the underlying approach to how synergy is created and managed.
7. “When the external environment is in a state of flux, the firm itself, in terms
of its bundle of resources and capabilities, may be a much more stable basis
on which to define its identity.
R M Grant, Contemporary Strategy Analysis, 3rd ed., 1998
In light of Grant’s statement, outline how a firm can build sustainable
competitive advantage and evaluate the extent to which it still needs to assess
its external environment.
See Tutorial 2 for comments on this
8. “European, American and Japanese capitalism each have distinctive
characteristics… each capitalist structure ends up with very different specific
capacities and cultures which are very hard to change. But what all do
have… are strong institutions that allow their firms to enjoy some of the
gains from co-operation as well as from competition.”
W Hutton, The State We’re In, 1995
Can Hutton’s view about the impact that differing “capitalisms” have upon
the strategies of companies within each country be sustained in the context of
today’s global financial markets?
A question on how so-called “global” financial markets tend to still have differences,
according to Hutton, that will affect the strategies of organisations. Coming from an
institutional economics perspective, Hutton argues that the provision of debt (by the
banks) and equity (capital markets) is influenced by the history of the way in which
the institutions have grown and how they now manage risk – hence his argument that
“gentlemanly capitalism” underpins the British system, with liquidity (bailing out
quickly) being dominant.
How does this affect companies? In effect, the financial system is part of the
competitive diamond, affecting firms’ strategy and structure. The management of
financial risk by institutions in the UK (see above) leads to a higher cost of capital.
This means that firms coming for investment capital can undertake fewer projects
(strategies) because they need a higher rate of return to justify them (those of you
familiar with NPV calculations will recognise this as higher discount rates).
Ultimately, this means less investment and management by take-over, argues Hutton.
In the video we watched on this subject, we saw Hutton’s argument in action as it
affected SMEs in the UK Oil Supply Industry cluster, the German Mittelstad and the
North Carolina Research Triangle.
9. “Shared assumptions help to explain the way business is done and strategy
develops”
G Johnson & K Scholes, Exploring Corporate Strategy, 5th ed. 1999
How can an understanding of corporate culture help to interpret the strategic
management process within an organisation?
This question explores the role of corporate culture upon the strategy process
(formulation and implementation).
You need to discuss the relationship between corporate culture and the process of
strategy development. In particular, the role of the paradigm in strategy formulation
and the dynamics of paradigm change need to be explored. This means explaining
how the paradigm influences an organisation’s view of itself and its environment.
This will influence its view of strengths/weaknesses and opportunities/threats as it
goes about formulating strategy and deciding upon options – affecting both its view of
the world and what it should do about it.
The extent to which strategic capabilities are embedded within the corporate culture is
an important issue – both as a source of success because they are difficult to copy and
as a potential source of failure if they prevent the organisation changing in response to
the environment. The “Icarus Paradox” can be mentioned in this context, as could the
recent problems of Marks and Spencer!
In answering the question you should demonstrate your understanding of the cultural
web, perhaps through an explicit application of the framework to a particular
example, in doing so illustrating the centrality of the underlying “paradigm”. You
may well use the “frames of reference” concept to highlight the influences upon this
particular corporate culture.