Being a Global Player

George S. Yip Professor of Management

Co-Director, CEIBS Centre on China Innovation China Europe International Business School

gyip@ceibs.edu

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Foreign Companies Are Coming to Turkey

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Turkish Companies Need to Go Global

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Top 10 Export Categories

2011–USD millions

Vehicles other than Railway 15,805

Machineries, Mechanical Appliances 11,563

Iron & Steel 11,226

Electrical Machinery & Equipment 8,882

Articles of Apparel and Clothing Accessories Knitted 8,396

Mineral fuels, oils, distillation products, etc. 6,539

Articles of Iron & Steel 5,759

Articles of Apparel and Clothing Accessories Not Knitted 5,129

Plastics and Articles Thereof 4,581

Edible Fruits, nuts, etc. 3.910

Source : Ministry of Economy

Turkey’s Export Mix

Source: MIT Harvard Economic Complexity Laboratory 5

China’s Export Mix

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Germany’s Export Mix

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Turkey’s vs. Germany’s Export Mix

Source: MIT Harvard Economic Complexity Laboratory 8

Some widely recognized brands

are owned by Turkish companies.

Godiva (Ülker)

Grundig (Beko)

Arctic (Arçelik)

Blomberg (Arçelik)

Turkish-Owned Brands

What Strategy to Use?

Strategic Objective

Business Model

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Why Does Strategy Matter?

Effective strategy gets you better

performance with fewer resources.

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Why Is Strategy Difficult?

If managers were going to do it anyway,

you would not need a strategy.

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A General Definition of Strategy

A planned, thought-out, perhaps indirect, way of achieving an objective.

Typically in contrast to a direct approach that takes the shortest, most costly path.

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Examples of Strategy

Objective : overtake the market leader in terms of market share Non-strategic approach : outspend in promotion Strategic approach : develop a sequence of multiple moves, some indirect, which in total cost less than the direct approach and has a higher chance of success.

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Business Model as the Base

How a company configures itself to do business and make money.

Operational Improvement

Business Model

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SCOPE

DIFFERENTIATION

ORGANIZATION

Nature of Inputs

Nature of Outputs

Channels How

Transform Inputs

Nature of Customers

Elements of a Business Model

VALUE PROPOSITION

George Yip, Using Strategy to Change Your Business Model, Business Strategy Review, 2004.

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National Context Issues

• 1. How sensitive is your business to national context?

• e.g., general merchandise retailing versus speciality retailing.

• 2. What national context issues are most relevant to your business model?

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Two Key Questions • Can you adapt your business model?

• Can you transfer your competitive advantages?

Business

Model

Bases of

Competitive

Advantage

Distance

Climate/environment

Economics

Demographics

Culture

Language

Role of government

Trade policies

Stage of market development

Technology

Technical Standards

Legal

Currency/financing

Channels of distribution

Marketing support services/information

Competitive structure

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The Hexagon of Competitive Advantage

Customer Market

Product / Service

Assets / Resources

Business System / Value Chain

Scale / Scope

Partners

COMPETITIVE ADVANTAGE

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Going International: Customer Market

• Follow domestic customer

• Use customers as reference

• Use standards as springboard

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The Pyramid of International Competitive Advantage

Population Size

Developing countries

Developed

Countries

Wealth/

Sophistication

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Going International: Products/Services

• Unique or superior products

• Ability to provide at all

• Adapt for local markets

• Offer global standard

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Going International: Business Systems/Value Chains

• Export from domestic business system

• Relocate some activities

– for specific country advantage

– to build regional/global advantage

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Going International: Assets / Resources

• Leverage/transfer existing/domestic assets and resources

• Add/substitute local assets/resources

• Directional effect

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Going International: Partners

• Follow your partners

• Have partners follow you

• Find new, local partners

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Going International: Economies of Scale

• Can you export from home/other base?

• Can new countries contribute to scale in existing bases?

• Are new countries’ markets large enough to support minimum efficient scale operations?

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Positioning for Emerging Market Companies

Dodger Contender

Defender Extender

customised to home market transferable abroad

high

low

Competitive Assets

Pre

ssure

to G

lobaliz

e in the Industr

y

Source: N. Dawar and T. Frost, “Competing with Giants”, Harvard Business Review, March-April 1999

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Defender

• Focuses on leveraging local assets in market segments where multinationals are weak.

– Examples:

– Shanghai Jahwa (China, cosmetics)

– Grupo Industrial Bimbo (Mexico, food)

– Arvind Mills (India, jeans kits) Source: N. Dawar and T. Frost, “Competing with Giants”,

Harvard Business Review, March-April 1999

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Extender

Focuses on expanding into markets similar to those of the home base, using competencies developed at home.

– Examples:

– Jollibee foods (Philippines, fast food)

– Televisa (Mexico, media)

– Asian Paints (India) Source: N. Dawar and T. Frost, “Competing with Giants”,

Harvard Business Review, March-April 1999

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Dodger

Focuses on a locally oriented link in the value chain, enters a joint venture, or sells out to a multinational.

– Examples:

– Skoda (Czechoslovakia, cars)

– Vist (Russia, PCs)

– Software companies in China after Microsoft’s entry

– Manufacturing companies in Mexico Source: N. Dawar and T. Frost, “Competing with Giants”,

Harvard Business Review, March-April 1999

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Contender

Focuses on upgrading capabilities and resources to match multinationals globally, often by keeping to niche markets.

Examples:

– Indah Kiat Pulp & Paper (Indonesia)

– Sundram Fasteners (India, GM’s supply network)

– Raba (Hungary, heavy-duty axles)

– Cemex (Mexico, cement)

– Sonae Industria (Portugal, wood panels)

– Four Dimensions (China, special purpose vehicles)

Source: N. Dawar and T. Frost, “Competing with Giants”, Harvard Business Review, March-April 1999; and G. Yip

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China’s cost innovation wedge

Manufacturing

Branding/R&D

Design/engineering/

distribution

Branding/R&D

Design/engineering/

distribution

Manufacturing

In the 1990`s, the cost

innovation wedge penetrated

only manufacturing

By 2005, the cost innovation

wedge penetrated design,

engineering, and even

branding and R&D

Source: P. Williamson and M. Zeng, Dragons at your Door: How Chinese Cost Innovation is Disrupting Global Competition. 2007

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China’s margin pressure and the cost revolution

R&D Manufacturing Branding/service

Margin

First wave attack

from Chinese

firms

Second wave

attack from

Chinese firms

Upstream Downstream

Activities

Source: P. Williamson and M. Zeng, Dragons at your Door: How Chinese Cost Innovation is Disrupting Global Competition. 2007

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Advance of the Chinese Frontier

Impediments

to cost

Innovation

Toys

Shoes Consumer electronics

Clothing Home appliances

Personal

computers

Frontier

1995 Auto

parts

Telecoms

equipments

Mobile

handset

Machinery

Frontier

2005

High

Low

Wide Narrow

Global gateways

Auto assembly

Petrochemicals,

medicine,

aircraft

Retailing,

banking/

FMCG

Source: P. Williamson and M. Zeng, Dragons at your Door: How Chinese Cost Innovation is Disrupting Global Competition. 2007

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Innovation in Large Companies?

Centre on China Innovation

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The capacity to innovate is only as strong as the weakest link in the innovation

value chain

Bottlenecks at any stage can impede the capacity to innovate

Idea generation Development Diffusion

The GUI and mouse were invented by Xerox, but were not

developed into commercial products

Sony tried to maintain control over the Betamax standard,

allowing JVC’s VHS format to dominate video recording

Source: Capgemini C4 Lab analysis. Company Websites

Development

Diffusion

Example Bottleneck Description

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For most organizations, there are challenges at every stage

Source: Capgemini C4 Lab analysis.

Large employee bases dedicated to operations and routine tasks

Little collaboration across units

Current organization priorities

Expectation for immediate results and returns

Legacy nature of services

Focus on markets within direct reach

Employees cannot generate a large number of good ideas

Lack of diverse perspectives on ideas generated within a unit

Selection criteria may eliminate potentially good ideas

Limited tolerance for experimentation and failure of new products

Diffusion limited by geographic markets and delivery platforms

Ch

alle

nge

s Im

plic

atio

ns

Many Factors May Impede Innovation

Idea generation Conversion Diffusion

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Key Elements of Context

Clear

Boundaries

Space to

Act

Support

from Above

Overall Direction

“Stretch Goal”

Source: Julian Birkinshaw

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The Other Side of Innovation - Innovation’s Missing Link

Ongoing operations

Strategy

Organizing and planning

Execution

Innovation

Committing to an innovative idea

Making innovation happen

Govindarajan, V and Trimble, C (2010). The other side of Innovation-solving the execution challenge, p. 16. Boston:

HBR Press. an and Trimble, The Other Side of Innovation. Harvard Business Review Press, 2010

The need to

reassess

organizing and

planning is often

overlooked.

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The Other Side of Innovation - Organizing An Innovation

Initiative

Project team= Dedicated Team + Shared Staff The Dedicated Team is custom-built for the initiative The Shared Staff retains its existing responsibilities and supports the initiative.

Govindarajan, V and Trimble, C (2010). The other side of Innovation-solving the execution challenge, p. 28. Boston:

HBR Press.

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The work of the innovation initiative should flow in parallel

with ongoing operations.

Govindarajan, V and Trimble, C (2010). The other side of Innovation-solving the execution challenge, p. 39. Boston:

HBR Press. Press, 2010

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The partnership, not just the Dedicated Team, executes the initiative

Govindarajan, V and Trimble, C (2010). The other side of Innovation-solving the execution challenge, p. 48. Boston:

HBR Press. an and Trimble, The Other Side of Innovation. Harvard Business Review Press, 2010

Great Innovators

Thomas Edison – innovation in technology

Steve Wozniak – innovation in products

Jack Welch – innovation in management

Albert Einstein – innovation in science

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The Most Successful Business Innovator of All Time? Who Will be Turkey’s Steve Jobs?

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The Global Company

The global company does not have to be everywhere,

but it has the capability to go anywhere,

deploy any assets, and access any resources.

And it maximizes profits on a global basis.

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