global strategy context chapter 10
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Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10
STRATEGYProcess, Content, Context
Chapter 10
The International Context
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10Agenda
I. The Issue of International Configuration Dimensions of Globalization Levels of Globalization International Composition International Management
II. The Paradox of Globalization and Localization The Demand for Global Synergy The Demand for Local Responsiveness
III. Perspectives on the International Context The Global Convergence perspective The International Diversity Perspective
IV. The Debate and Readings
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10I. International ConfigurationInternational Composition and International Management
The Issue of International ConfigurationHow should the firm organize its activities across borders?
International CompositionIn which countries does a company want to be active
in and how much involved do they want to be?
International ManagementHow should a company organize itself in order to deal
with its border-spanning nature?
Dimension of GlobalizationWhat is global?
Levels of GlobalizationWhat is the subject of globalization?
Which countries are selected to do business in?
International Scope
How are the value adding activities
distributed across the selected countries?
International distribution
1. Standardization2. Coordination3. Centralization
Three Integration Mechanisms
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10Dimensions of GlobalizationVarious Elements
Worldwide scope
Spatial dimension: ‘Global’ used as a geographic term.
Worldwide similarity
Variance dimension: ‘Global’ used as a term to refer to homogeneity around the world.
Worldwide integration
Linkages dimension: ‘Global’ used as a term to refer to the world as one tightly linked system.
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10Dimensions of GlobalizationInternationalization and Globalization of the Firm
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10Levels of GlobalizationMacro, Meso and Micro Level
Globalization of Economies
Macro level: Are the world’s economies in general experiencing a convergence trend?
Globalization of Businesses
Meso level: Are customer demands similar around the world? Do producers compete with one another on a global scale?
Globalization of Companies
Micro level: Do individual firms compete with one another on a global scale?
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10International CompositionInternational Growth Options
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10International CompositionInternational Scope and Distribution
In which countries does a company want to be active in and how involved is it?
Geographic spectrum: In how many countries does the company want to
be active in, and which countries should these be?
International ScopeDistribution of value adding
activities: How can resources and activities best be divided across the
various countries?
International distribution
International Composition
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10International CompositionExample of Foreign Sales Market Portfolio
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10International ManagementIntegration Mechanisms
CentralizationIntegrating activities at one central location in order to gain economies of scale or using the competitive advantage of a particular country
CoordinationAligning activities in different countries in order to serve border-crossing clients or to respond or attack competitors
StandardizationEqualizing activities in each country, in order to achieve economies of scale or to serve border crossing customers
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10International ManagementGeneric Organizational Models for International Firms
Barlett and Ghoshal, 1995
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10International ManagementCharacteristics of Generic Organizational Models
Organized along geographic lines Subsidiaries are self-sufficient (autonomous) Level of standardization is low Multinational
Decentralized Federation Organized along geographic lines Close HQ-subsidiary relationship Core competences are developed
centrally International
Coordinated Federation
National units relatively unimportant Level of standardization/ centralization is high Coordination is directed by HQ Global
Centralized Hub Close HQ-subsidiary relationships Close subsidiary-subsidiary
relationships Low level of centralization Transnational
Integrated Network
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10II. Globalization and LocalizationDealing with the Paradox
Local Responsiveness
The ability to remain attuned to specific national
market demands, responding adequately and
timely to unique characteristics
GlobalSynergy
The ability to create value by leveraging resources, integrating activities and aligning product offerings
across two or more countries
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10Global SynergyForms of Cross-Border Synergies
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10Global SynergySources of Cross-Border Synergies
I. Achieving resource reallocation
II. Achieving resource replication
IV. Reaping location advantages
III. Reaping scale advantages
V. Dealing with cross-border customers
VI. Dealing with cross-border competition
AligningPositions
LeveragingResources
IntegratingActivities
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10Local ResponsivenessMost Important Differences between Countries
Government Regulations
Customer Needs
Buying Behavior
Substitutes
Distribution Channel
Media Structure
Infrastructure
Supply Structure
Market Structure
Strategy – Process, Content, Context The International ContextDe Wit & Meyer
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10III. Overview of the PerspectivesGlobal Convergence vs. International Diversity
INTERNATIONAL DIVERSITY PERSPECTIVE
Localization over globalization
Fostering international diversity
Cultivating fragmentation of international linkages
Cultural and institutional identity
Diversity is reality; divergence can be exploited
Local responsiveness focus
Adapt/decentralize unless
Locally leveraged innovation
Transnational structure (integrated network)
GLOBAL CONVERGENCE PERSPECTIVE
Globalization over localization
Growing international similarity
Growing integration of international linkages
Technology and communication
Diversity is costly; convergence can be encouraged
Global synergy focus
Standardize/centralize unless
Center-for-global innovation
Global structure(centralized hub)