* corporations
TRANSCRIPT
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Regional&
Global Strategy
Khurram Zafar
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Objectives1. Defne the terms International
BusinessandMNC.2.Discuss the2primary ways in whichinternational business occurs:a)Trade &
b)Foreign Direct Investment (FDI).3.Examine the impact o the TRIAD
on international trade and
investment..Descri!e the current state o world
economies and the role o
government and trade regulations
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Objectives".Discuss the importance o
technology and the role o #MEs inthe international business arena.
$.Examine how MNCs use triad !regional strategies to compete
e"ectively in the internationalmar#et place.%.Discuss the determinants o
national competitive advantage.
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Introduction International $usiness: the study of
transactions taking place across nationalborders for the purpose of satisfying theneeds of individuals and organiations!
%ultinational orporations (%'s): acompany head"uarter in one country buthaving operations in other countries!
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#ultinational Strategies & Structuresressures or ost eductions and *ocal esponsiveness
Four strategic choices or %'s
+.,ome eplication -trategy emphasies theinternational replication of home country$basedcompetencies
.*ocali/ation (multidomestic) strategy is an e%tension
of the home replication strategy focusing on a number offoreign countries'regions each regarded as a stand$alonelocal market (orthy of signi)cant attention and adaptation
0.1lobal standardi/ation strategy is the opposite of the
localiation strategy2.Transnational strategy aims to capture *the best of
both (orlds+ by endeavoring to be both cost e,cient andlocally responsive
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#ultinational Strategies and Structures45he Integration6Responsiveness 7rame(ork
--$-.$/an$-012 2
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7our Organiational StructuresFour organi/ational structures that
are appropriate or the our strategicchoices:
1! International division
-! Geographical area
.! Global product division
8! Global matri%
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1! International :ivision
International Division
5ypically set up (hen )rms initially e%pandabroad often (hen engaging in a homereplication strategy
roblems:
7oreign subsidiary managers in theinternational division are not given su,cientvoice relative to the heads of domestic divisions
5he *SI;O+ e
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-! Geographic >rea Structure1eographic 3rea -tructure
Organies the #?@ according to di
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.! Global Eroduct :ivision Structure
1lobal roduct Division -tructure
Supports a global strategy in treating eachproduct division as a stand$alone entity (ith full(orld(ideFas opposed to domesticFresponsibilities for its activities
7acilitates attention to pressures for coste,ciencies in allo(ing for consolidation on a(orld(ide Aor regionalB basis and reduction of
ine,cient duplication in multiple countriesroblems:
It is the opposite of the geographic area
structure4 ;ittle local responsiveness2 - Lecture - MNC - by Khurram Zafar--$-.$/an$-012 10
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8! Global #atri%
1lobal %atri4
Is often used to alleviate the disadvantagesassociated (ith both geographic area andglobal product division structures
Is intended to support the goals of thetransnational strategyFin practice it is oftendi,cult to deliver
roblems
#ay add layers of management slo( do(ndecision speed and increase costs (hile notsho(ing signi)cant performance improvement
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A Comprehensive Model ofMultinational Structure,
Learning, and Innovation
2 - Lecture - MNC - by Khurram ZafarFigure 10.6--$-.$/an$-012 1-
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Industry$ased @onsiderationsIndustry characteristics
Industrial products )rms4 7avor global product divisions
@onsumer goods )rms4 7avor geographic areas
orter5s orces
Inter)rm rivalry increasingly focuses on learning and
innovation
?eed to heighten entry barriers4 ehind some recentmoves to phase out multi$domestic strategy and to erect(orld$scale facilities to deter entrants
argaining po(er of suppliers and buyers4 5hey also haveto internationalie if the focal #?H goes overseas
#?H R&: often generates competing substitute products
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Resource$based @onsiderations
6alue :oes any ne( structure Asuch as matri%B really add value
:oes innovation really add value ?ot al(aysJ
arity Chen all rivals adopt a *global strategy+ it is not rare
Imitability It is easier to imitate formal structure! ut ho( to imitate an
elusive informal matri% (hich is a *philosophy+
7rgani/ation Some #?@s are better able to take advantage of comple%organiational structures such as matri% than others
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Institution$ased @onsiderationsFormal and inormal e4ternal institutions
Formal Institutions
H%ternally #?Hs are subject to the formal institutionalframe(orks erected by various home$ and host$countrygovernments
ost$country governments often encourage or coerce #?Hsinto undertaking certain activities
Inormal Institutions Strategists (eigh the informal backlash against activities (hich
result in domestic job losses
Formal and inormal internal institutions
7ormal organiational charts do not necessarily reveal theinformal rules of the game
5hree choices4 A1B a home$country national as the head of asubsidiary A-B a host$country national or A.B a third countrynational
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#ost #?@Ls activity can be classi)ed into
t(o major categories4+. Trade (e4ports and imports):
#ore than 30M of all trade is made by
the (orldLs largest 300 #?@s!. Foreign Direct Investment (FDI):
=0M of all 7:I is made by the (orldLs
largest 300 #?@s!
#?@s >ctivity
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Trade & Investment
Tradeconsists of e%ports and imports4
84ports:goods and services producedin one country and then sent toanother country!
Imports:goods and services producedin one country and bought in anothercountry!
Foreign Investment: consists ofcompanies investing funds to start orimprove operations in another country!
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5he 5riad
#ost global transactions take place (ithin
and bet(een three key regions41! 5he Nnited States
-! 5he Huropean Nnion and
.! /apan5hese are referred to as4
5he *5R>I:+
h i d h i d A B
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5he 5riad4 5he Nnited States ANSB1! 5he NS has the largest economy in the (orld
(ith a G:E of over P10 trillion!
-! 5he NS is part of the ?orth >merican 7ree5rade >greement A?>75>B (ith @anada and#e%ico!
.! 5he NS economy is signi)cantly larger thanthat of its t(o trading partners and is thereforea triad member on its o(n!
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AHNB1! 5he HN Aor HN-9B is composed of the
countries in the HN13 A>ustria elgium:enmark 7inland Germany Greece7rance Ireland Italy ;u%embourg the?etherlands Eortugal Spain S(edenand the NKB and t(elve ne( mainly@entral Huropean countries that joinedin -008 and -009!
-! 5he collective G:E of the HN is greaterthan that of the NS and /apan!
.! 5he HN-9 is the (orldLs largest importer
and e%porter!
5h 5 i d /
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5he 5riad4 /apan /apan is the ;argest economy in >sia!
/apan is the 8
th
;argest importer and 8
th
;argeste%porter in the (orld!
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5odayLs
International
Hnvironment
I t ti l i
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5he international business environment has
changed rapidly in recent years as a resultof4
1! >n overall slo(do(n of triad
economies-! Increased trade liberaliation throughtrade agreements
.! Improvements in technology8! 5he emergence of S#Hs!
International usinessHnvironment
Sl d f 5 i d H i
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Slo(do(n of 5riad HconomiesIn the late 1DD0s and in -000s the Nnited
States the HN and /apan all e%perienced areduction in economic activity (hich inturn decreased international businessactivity!
I t ti l 5 d R l ti
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International 5rade Regulation>n important international business trend hasbeen the emergence of regional and global tradeand investment liberaliation and internationalregulation!
1! 5he Corld 5rade Organiation AC5OB!
-! General >greement on 5ari55B!
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5he Corld 5rade Organiation
1! Hstablished on /anuary 1 1DD3!
-! >n international organiation that deals (ithrules of trade among member countries!
.! Hnforces the provisions of the General>greement on 5ari55B!
8! >cts as a dispute$settlement mechanism!
G l > t 5 i< &
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General >greement on 5ari55B
1! Hstablished in 1D89 to liberalie tradeand to negotiate trade concessionsamong member countries!
-! 5oday the C5O is enforcing theprovisions of the G>55!
I d 5 h l
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Improved 5echnology#ore po(erful and a
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Small & #edium Sie HnterprisesAS#HsB
1! 5he de)nition of S#Hs varies accordingto the nation! In general it refers tocompanies (ith bet(een 11 and 300
employees (ith sales of less than P3million!
-! #?@s often purchase from S#Hs! 5his is
because their specialied (orkforcesinnovation and technology allo(s S#Hsto provide goods and services moree,ciently than if the #?@ (ere to sourcethese internall !
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Globaliation andStrategic
#anagement
egional Triad
#i ti b t #?@s
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#isconceptions about #?@sommon misconce&tionsabout %'s:
1! #?@s have far$Qung operations or earnmost of their revenues overseas!
-! #?@s are globally monolithic and
e%cessively po(erful in political terms!.! #?@s produce homogeneous products
for the (orld market and through their
e,cient techni"ues are able to dominatelocal markets every(here!
sconcep ons a ou s
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In 'act9
8! #?@s earn most of their revenues intheir home regions!
3! 5he largest 300 #?@s are not spread
around the (orld but clustered aroundthe triad!
2! 5hese #?@s engage not in global
competition but in triad ' regionalcompetition this rivalry e
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Globaliation and strategicmanagement
%aintaining
8conomic
Globaliation andStrategic
#anagement
E t L : t i t f
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EorterLs :eterminants of?ational @ompetitive >dvantage
hy are some ;rms able to innovateconsistently while others are not