classes 4 and 5

Making Global Strategy Work

Douglas Reid

dreid@business.queensu.ca@douglasreid

#mbus902

Today: Getting things done in the MNE

800-930 Recap and briefing

930-945 Break

945-1045 Malur Narayan (Tata)

1045-1100 Break

1100-1200 BRL Hardy (part)

1200-100 Lunch

100-200 BRL Hardy (part), briefing

200-300 Nabeel Malik (FCMB)

300-330 Break

330-430 Jim McAllister (Novartis Animal Health)

430-500 Summary and close

Customer willingness to pay

Cost of delivering

what the customer buys

Strategy

Four types of distance matter in IB

Cultural distance

Administrative distance

Geographic distance

Economic distance

Different languages

Different ethnicities

Lack of connective social networks

Different religions

Different social norms

Absence of colonial ties

Absence of shared monetary or political association

Political hostility

Government policies

Institutional weakness

Physical remoteness

Lack of common border

Landlocked

Size of country

Weak transport’n or communication links

Climatic differences

Difference in consumer incomes

Differences in costs and quality of resources: Natural Financial Human Infrastructure Intermediate input markets Information or knowledge

Attrib

utes

Cre

ating

Dis

tanc

e

Source: Ghemawat, 2001

Distance Difference Cost Risk

Firm-SpecificAdvantage

Internationalization Process

Why

How

WhereWhat Locational attractiveness

ADDING Helps Answer “Why?”

• Adding volume (growth)

• Decreasing costs

• Differentiating (increasing WTP)

• Improving industry attractiveness (bargaining power)

• Normalizing (optimizing) risk

• Generating knowledge (and other resources, capabilities)

Source: Ghemawat

Source: Dunning

Resource seekers

Source: Dunning

Market seekers

Source: DunningEfficiency seekers

Strategic Asset Seekers

Volvo XC90 (Source: www.autospectator.com) Geely FC-1(Source: www.leblogauto.com)

Volvo Geely

Country of Origin Sweden China

Founding Year 1927 1986

No. of Models 10 7

Price Range 25,600-49,000 USD ~8,000-9,500 USD

Company Revenue 2009 12.4 bn USD 2.1 bn USD

Competitive Advantage Safety, Design, Quality Low Cost, ImitationsSource: Dunning

The Value Chain

Natural advantages

Government and social advantages

Available alternatives

Entrant characteristics,

preferences and choices

Mode

Occasional export

Licensing

Joint venture

Wholly-ownedsubsidiaryLevel of

Control over

ForeignActivities

Resources Committed to Foreign Market

Franchising

Export through agent

Source: Bartlett and Ghoshal

Escalating c

ommitment

The world today…

The great rebalancing

The productivity imperative

The global grid

Pricing the planet

Market state

Source: World Bank (Gao Xu blog)

Does this matter?

Source: McKinsey, 2010

Source: PRTM

50% of manufacturing to be done in host countries by 2010

Response by MNEs…and implications

Subsidiary competence

Importance of host country market

StrategicleaderContributor

Black holeImplementer

High

Low

High

Low

Source: Bartlett and Ghoshal; Verbeke, Huebner and Yuan

17%

12% 21%

50%

Subsidiaries have different roles and skills within the MNE

What are the barriers to realizing desired outcomes?

Solutions – vectors / means of coordination

Corporate strategy

Operating decisions and practices – decision rights

Corporate culture

Trusted insiders (expatriates)

Global coordinators

Corporate strategy

Operating decisions and practices – decision rights

Corporate culture

Trusted insiders (expatriates)

Global coordinators

Fundamental Job of Management

"… to maintain the cooperative system."

Chester BarnardThe Functions of the Executive, 1938

Expatriates

Global managers get things done over distances…

What are the most important skills for being a great global manager?

Critical Skills

• Developing peer relationships

• Carrying out negotiations

• Motivating subordinates

• Resolving conflicts

• Establishing information networks

• Disseminating information

• Making decisions in conditions of ambiguity

• Allocating resources

• Constant learner

• External representation

Articulation of current mindset

Exposure to diversity

Integration of old and new knowledge

Curiosity

Comfort with differences

Cultivating global mindsets…

Let’s summarize…

Virtual office hours

http://queensbusiness.adobeconnect.com/douglasreid/

Wednesday, July 275:00 – 6:00 PM(Kingston time)

Backup will be Skype: dreid150