Chapter 8
Global Strategy:
Harnessing New Markets
to Extend Advantage
by Robert Pitts
& David Lei
Slides prepared by
John P. Orr
Cameron University
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-1
What you will learn…
Slide 1 of 2
• Why companies need to develop
strategies to expand across national
borders
• The key environmental factors that
promote the need to expand into
overseas markets
• The two basic strategies used for
expanding overseas: global and
multidomestic
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-2
What you will learn…
Slide 2 of 2
• Balancing the benefits and costs
of overseas expansion
• How companies can continue
to grow by becoming
global players
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-3
Boeing’s Global Strategy
• Advanced research and
development (R&D)
• Manufacturing efficiencies and
process improvements
• Global marketing
• Continuous product
improvement and investment
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-4
Coca Cola’s Global Strategy
• A unifying message
• Global distribution and business
systems
• New products and new
variations
• Community involvement
• Recent initiatives
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-5
Global Strategy: Introduction
• Globalization
– Viewing the world as a single market for the
firm;
– The process by which the firm expands
across different regions and national
markets.
• Industry-Level View of Globalization
– Changes in economic factors, such as
economies of scale, experience, and R&D,
which make competing on a worldwide basis
a necessity.
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-6
Ex. 8-1. Factors Promoting the
Globalization of Markets
• Narrowing of demand characteristics
• Escalating costs of R& D
• Cost reduction pressures and economies of scale
• Government industrial policies
• Reduction of factor costs (e.g., labor, capital)
• Rise of new distribution channels
• Reduction of transportation, communication, & storage
costs
• Internet access
• Reduction of tariffs worldwide
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-7
Ex. 8-2. Examples of Growing
Homogeneity of Demand
Slide 1 of 2
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Communications equipment
Cellular phones
Sony Walkmans
Levi’s jeans
Commercial banking
Financial services
Color televisions and VCRs
Semiconductors
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-8
Ex. 8-2. Examples of Growing
Homogeneity of Demand
Slide 2 of 2
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•
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Machine tools
Computers
Pharmaceuticals
Construction equipment
Commercial aircraft
Hollywood films
Television shows
Data and computer networks
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-9
Ex. 8-3: Examples of R&D Intensive
Industries
Slide 1 of 2
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Semiconductors
Software
Biotechnology
Communications systems
Pharmaceuticals
Commercial aircraft
Electronics
Composite materials
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-10
Ex. 8-3: Examples of Growing
Homogeneity of Demand
Slide 2 of 2
• Advanced imaging systems
• Medical equipment
• Fiber optics
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-11
Ex. 8-4. Examples of Rising Economies
of Scale/Cost Pressures
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Steel
Automobile engines
Color television tubes
Semiconductors
Fiber optics
Office equipment
Telecommunications
Aircraft
Chemicals
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-12
Ex. 8-5: Government Initiatives to
Promote Industrial Development
Sematech
(semiconductors)
US
Japan
EU
Steel, Computers, Autos,
Artificial Intelligence,
Advanced Materials,
Aerospace
Semiconductors, Aerospace,
Automobiles, Advanced
Lasers, Optics
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-13
Ex. 8-6. Examples of Declining Costs
Slide 1 of 2
Transport Costs
• Containerization
• Intermodal shipping/rail
• Air freight
Communication Costs
• More global long distance carriers
• Better ways to transmit voice, video data
• Internet access
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-14
Ex. 8-6. Examples of Declining Costs
Slide 2 of 2
Storage Costs
• Refrigeration
• Just-in-time inventory
• Reduction of perishability
• Supply chain management
• Virtual production/design
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-15
Ex. 8-7. Global Strategy of Expansion
• Systemwide approach to competing worldwide
• Mutually interdependent subsidiaries
• Centralized control and reporting of activities
• Facilitates cross-subsidization policies across markets
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-16
Ex. 8-8: Key Characteristics of a
Global Strategy
• Standard products
• Global economies of scale in key
components and activities
• Leverage technology across many
markets
• Global coordination of marketing and
sales systemwide
• Cross-subsidization policies to
respond to competitive moves by other
global strategy firms
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-17
Ex. 8-9: Multidomestic Strategy of
Expansion
• 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.
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-18
Ex. 8-10: Key Characteristics of a
Multidomestic Strategy
• 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
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-19
Ex. 8-11: Benefits of Global
Expansion
• Market growth and expansion
opportunities
• Recovery of R&D and investment costs
• Creation of a distinct image
• Accelerated learning and
transfer of new skills
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-20
Ex. 8-12: Costs Associated with Global
Expansion
Slide 1 of 2
Costs of Strategic Leverage
• Sustained investment required
• Preserving and extending image
Costs of Flexibility
• High interdependence of subsidiaries
(and businesses)
• Change or development affecting all
markets
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.
Slide 8-21
Ex. 8-12. Costs Associated with Global
Expansion
Slide 2 of 2
Costs of Cooperation
• Compromise
• Accountability
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Slide 8-22
Ethics: Global Concerns
Scandals with global reach
• Lloyd’s of London embezzlement
• French, German stock market fraud
• Japanese business, political scandals
Varying approaches to ethics
• Individual views strongly shape ethics of U.S.
workers
• Asian workers seen as “industrial soldiers”
• U.S. enacts Foreign Corrupt Practices Act
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Slide 8-23