Global Strategic Management
Philips & Matsushita:
Types of International Strategy
Jeff Dyer - BYU
TYPES OF INTERNATIONAL STRATEGY
MULTI-DOMESTIC STRATEGY
GLOBAL STRATEGY
• Product is fully customized in each
country.
• Product is standardized worldwide
• Decentralized federation of national
organizations. Local decision making
authority.
• Centralized organization structure.
National subsidiaries possess little
decision-making authority.
• Effective when differences between
countries are large.
• Effective when differences between
countries are small.
• Sources of Advantage:
• Differentiation
• Local responsiveness
• Minimize political risk
• Minimize rate exchange risk
• Sources of Advantage:
• Cost
• Ability to coordinate activities
• Speed in new product
development
Jeff Dyer - BYU
A FRAMEWORK FOR ANALYSIS
Pressures
for Global
Integration
Pressures
for Local
Differentiation
Jeff Dyer - BYU
A Framework:
Global Integration - Local Differentiation
Global
Strategy
Forces for Global
Integration
High
Local
Strategy
Multi-domestic
Strategy
Low
Low
Forces for Local
Differentiation
High
Jeff Dyer - BYU
GLOBAL STRATEGY
STRATEGIC INTENT: Gain Global Market
Share Leadership
POLICIES:
• Specialized Production and R&D
Centers
• Break Down Value Chain and Exploit
Low Cost Locations
HQ
• World Products to Build Volume and
Global Product Roll-out
• Price Leadership
• Optimize Global Network at Local
Expense
• International Human Resources
Source: J. de
la Torre
Jeff Dyer - BYU
The Extreme Global Value Chain
Country
A
B
C
D
E
F
G
H
Activities
R&D
Design
Purchasing
Manufacturing
Etc.
Design
Purchasing
Manufacturing
Marketing
Selling
Distribution
Service
Jeff Dyer - BYU
THE GLOBAL MAXIMIZER
Some Companies Emphasizing this Approach:
•
•
•
•
•
•
Matsushita
IBM
American Express
LM Ericsson
Toyota
Sony
•
•
•
•
•
•
Royal Dutch Shell
Caterpillar
Hewlett Packard
Boeing
Intel
Coca Cola
THERE IS RELATIVELY LITTLE ROOM FOR JOINT VENTURES
IN THIS MODEL, EXCEPT FOR UPSTREAM ACTIVITIES.
ACQUISITIONS PLAY A SECONDARY ROLE VS. INTERNAL
GROWTH AND GREENFIELD INVESTMENTS.
Source: J. de la
Torre
Jeff Dyer - BYU
2. A MULTI-DOMESTIC STRATEGY
STRATEGIC INTENT: Gain Key Positions in
Selected Markets
POLICIES:
• Tailor Products to National
Idiosyncrasies
• Differentiated Operations
HOLDING
• Sacrifice Efficiency for Market Access
• Reach Economies of Scale Upstream
• Maximize Local Value Added
• Gain Government Support
• Use Join Ventures to Preempt
Competition and Add Local Value
• National Human Resources
Source: J. de
la Torre
Jeff Dyer - BYU
The Fully Multi-local Value Chain
Country Activities
A
B
C
R&D
R&D
R&D
Design
Purchasing
Manufacturing
Market
-ing
Design
Purchasing
Manufacturing
Market
-ing
Design
Purchasing
Manufacturing
Market
-ing
Design
Purchasing
Manufacturing
Market
-ing
Selling
Distribution
Service
Selling
Distribution
Service
Selling
Distribution
Service
Selling
Distribution
Service
*
*
*
*
Z
R&D
Jeff Dyer - BYU
THE FEDERALIST
Some Companies Emphasizing this Approach:
•
•
•
•
•
•
Philips
Nestlé
BASF
General Motors
Carrefour
Wal-Mart
•
•
•
•
•
•
Unilever
Procter & Gamble
Federal Express
PricewaterhouseCoopers
KPMG
Heineken
THERE IS AMPLE ROOM FOR JOINT VENTURES AND LOCAL
AFFILIATIONS IN THIS MODEL. ACQUISITIONS PLAY AN
IMPORTANT ROLE TO OBTAIN DOMESTIC PRESENCE IN
IMPORTANT MARKETS
Source: J. de
la Torre
Jeff Dyer - BYU
Linking Market, Strategy,
Structure & Processes
Environment / Market
Costs
Competitors
Customers Government
Firm Strategy
Firm Structure and Processes
Analysis of the environment / market precedes choice of firm
strategy which precedes choice of firm structure and processes.
Jeff Dyer - BYU
Where Next ?
High
Forces for Global
Integration
?
Low
Low
Forces for Local
Responsiveness
High
Jeff Dyer - BYU