Jeff Dyer - BYU

Global Strategic Management

Philips & Matsushita:

Types of International Strategy

Jeff Dyer - BYU

TYPES OF INTERNATIONAL STRATEGYTYPES OF INTERNATIONAL STRATEGY

MULTI-DOMESTIC STRATEGYMULTI-DOMESTIC STRATEGY

• Product is fully customized in each country.

• Decentralized federation of national organizations. Local decision making authority.

• Effective when differences between countries are large.

• Sources of Advantage:

• Differentiation

• Local responsiveness

• Minimize political risk

• Minimize rate exchange risk

GLOBAL STRATEGYGLOBAL STRATEGY

• Product is standardized worldwide

• Centralized organization structure. National subsidiaries possess little decision-making authority.

• Effective when differences between countries are small.

• Sources of Advantage:

• Cost

• Ability to coordinate activities

• Speed in new product development

Jeff Dyer - BYU

A FRAMEWORK FOR ANALYSIS

Pressuresfor GlobalIntegration

Pressuresfor LocalDifferentiation

Jeff Dyer - BYU

A Framework: Global Integration - Local Differentiation

High

High

Low

Low

For

ces

for

Glo

bal

Inte

grat

ion

Forces for LocalDifferentiation

Global Strategy

Multi-domestic Strategy

Local Strategy

Jeff Dyer - BYU

HQ

STRATEGIC INTENT: Gain Global Market Share Leadership

POLICIES:

• Specialized Production and R&D Centers

• Break Down Value Chain and Exploit Low Cost Locations

• World Products to Build Volume and Global Product Roll-out

• Price Leadership

• Optimize Global Network at Local Expense

• International Human Resources

GLOBAL STRATEGY

Source: J. de la Torre

Jeff Dyer - BYU

The Extreme Global Value Chain

CountryCountry ActivitiesActivities

A

B

C

D

E

F

G

H

R & D

Design

Purch-asing

Manu-facturing

Marketing

Selling

Distrib-ution

Service

Design

Purchasing Manu-facturing

Etc.

Jeff Dyer - BYU

THE GLOBAL MAXIMIZER

Some Companies Emphasizing this Approach:

• Royal Dutch Shell

• Caterpillar

• Hewlett Packard

• Boeing

• Intel

• Coca Cola

• Matsushita

• IBM

• American Express

• LM Ericsson

• Toyota

• Sony

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

HOLDING

STRATEGIC INTENT: Gain Key Positions in

Selected Markets

POLICIES:

• Tailor Products to National Idiosyncrasies

• Differentiated Operations

• 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 ResourcesSource: J. de la Torre

Jeff Dyer - BYU

The Fully Multi-local Value Chain

Country Activities

A

B

C

****

Z

R & D Design ServiceDistrib-utionSelling

Market-ing

Manu-facturing

Purch-asing

R & D

R & D

R & D

Design

Design

Design

Purch-asing

Purch-asing

Purch-asing

Manu-facturing

Manu-facturing

Manu-facturing

Market-ing

Market-ing

Market-ing

Selling

Selling

Selling

Distrib-ution

Distrib-ution

Distrib-ution

Service

Service

Service

Jeff Dyer - BYU

THE FEDERALIST

Some Companies Emphasizing this Approach:

• Unilever

• Procter & Gamble

• Federal Express

• PricewaterhouseCoopers

• KPMG

• Heineken

• Philips

• Nestlé

• BASF

• General Motors

• Carrefour

• Wal-Mart

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

A n a lys is o f th e en viron m en t / m arke t p reced es ch o ice o f firms tra teg y w h ich p reced es ch o ice o f firm s tru c tu re an d p rocesses .

F irm S truc ture and Processes

F irm S tra tegy

E nvironm ent / M arke t C os ts C om p etito rs C u s tom ers G overn m en t

Jeff Dyer - BYU

Where Next ?

High

High

Low

Low

For

ces

for

Glo

bal

Inte

grat

ion

Forces for LocalResponsiveness

?