Download - Business Strategy & Policy PSU MGMT #562
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04/21/23 Dave Garten – Business Strategy 2
DeBeers CaseObjective: look at how monopoly power affects organizations & global industry -- how govt. policy & competitive forces seek to change it.
X
Learnings: Antitrust policy is ultimately tied to
consumers Even the most powerful
organizations have to react to a changing environment
It takes many years to bring down or build a powerful position.
Changing business models is frightening and risky – it is generally accompanied by resistance.
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04/21/23 Dave Garten – Business Strategy 3
Session Objectives
To Gain an Initial Understanding of: 1. Economic Value of International Strategies
(Why?)2. Options, Barriers and Approaches (What?)3. Execution Considerations (How?)4. Organizational Responsibilities (Who?)
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04/21/23 Dave Garten – Business Strategy 4
Int’l Growth Drivers (Why?)
Lowering of Intl BarriersImproving logistics infrastructureImproving communications infrastructureIncreasing standardsHeightened competition
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04/21/23 Dave Garten – Business Strategy 5
Why go International?
Source: Intel Annual Report, 2004
P&G: Steady int’l growth
Intel
0%
20%
40%
60%
80%
100%
Inte
lIB
MApple
P&G
Mat
su…
Philips
De Bee
rs
Mondav
i
APAC
EMEA
AmericasR
even
ue
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04/21/23 Dave Garten – Business Strategy 6
Int’l Strategy Drivers (Why?)
International Economies
of Scope
Gain access to new customersGain access to low-cost factors of production
Develop new core competencies
Leverage current core competencies in a new way
Manage corporate risk
Derived from: Gaining and Sustaining Competitive Advantage, Second Edition, Jay B. Barney, 2002 p. 518
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04/21/23 Dave Garten – Business Strategy 7
Access to New Customers
Customer that are willing to buy
Customer that are able to buy
Target Market
Segmentation
Targeting
Market Growth
$
Product
Price
Place
Promotion
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04/21/23 Dave Garten – Business Strategy 8
Access to New Customers - Barriers
Tariffs Quotas Nontariff Barriers
Taxes levied on Imported Goods or Services
Quantity Limits on the Number of Products or Services that can be imported
Rules, Regulations, and Policies That Increase the Cost of Importing Products or Services
Import DutiesSupplemental DutiesVariable leviesBorder leviesCountervailing duties
Voluntary quotasInvoluntary quotasRestricted import licensesMinimum Import limitsEmbargoes
Govt. PoliciesGovt. procurement proceduresGovt. sponsored export subsidiesCustom policiesQuality standards
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04/21/23 Dave Garten – Business Strategy 9
Access to Supply Chain
Raw MaterialsLabor Manual Labor Knowledge Workers R&D
Technology
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04/21/23 10
Options, Barriers, and Approaches (What?)
What key issues must be addressed with your strategy?
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04/21/23 Dave Garten – Business Strategy 11
Challenges & Opportunities1. Heterogeneity across markets2. Scale and Complexity of Global
Operations3. Unpredictability of economic
conditions between countries (volatility)
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04/21/23 Dave Garten – Business Strategy 12
International Risk FactorsFinancial – Complexity, Variability Currency Credit Inflation
Political Risks Macro scale Micro scale
Relationship Risks Communication/Culture Objectives
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04/21/23 13
Execution Considerations (How?)
VRIO?
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04/21/23 Dave Garten – Business Strategy 14
ImitatorsDirect Duplication of International Strategy Will competing firms try?
Profits/market share motivate Are they able?
Substitutes Strategic alliances, diversification,
M&A
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04/21/23 Dave Garten – Business Strategy 15
Growth Strategies
New Business or
Competency
New Markets
Current Business or
Competency
Current Markets
High Risk
High or Low Risk
Moderate Risk
Moderate Risk
Access new customers
Do nothing
Access new customers with
new competencies
Develop new competencies or leverage current competencies in
new way
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04/21/23 Dave Garten – Business Strategy 16
Market entry options
Source: Berkowitz
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04/21/23 17
Organizational Considerations
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04/21/23 Dave Garten – Business Strategy 18
Int’l Strategy: Organization
Cost Efficiency
Loca
l R
esp
on
siven
ess
Global
Multinational
X
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04/21/23 Dave Garten – Business Strategy 19
Appropriate Organizational Structure
HighLow
Low
High
Importance of local
responsiveness
Importance of global integration
Decentralized federation
Coordinated federation
Centralized hub
Transnational federation
Source: Gaining and Sustaining Competitive Advantage, Second Edition, Jay B. Barney, 2002 p. 546
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04/21/23 Dave Garten – Business Strategy 20
Organizational Structures
Decentralized federation
Centralized Hub
Coordinated federation
Transnational
•Full P&L
•High Autonomy
• Duplication
•Full P&L
•High Autonomy
• Some Centralized Strategy
• Less Duplication
•P&L
•Low Autonomy
• Execution Focus
• Centralized Strategy
• Less Duplication
•Full P&L
•Autonomy
• Some Centralized Strategy
• Regional specialization
• Global leverage of competencies
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04/21/23 Dave Garten – Business Strategy 21
Strategies for Emerging Markets
Then vs. Now Then: low cost production, opportunistic export/marketing. Now: revenue opportunities. Disposable income, reach of
media/internet
High risks: political, economic & infrastructure Distribution, market data, communications, instability/lack of
regulatory discipline, product diversion, counterfeiting, complex networks.
Yet…opportunities…each situation is unique General classification mask the complexities (ex: China GDP) Political and social systems, openness , product markets,
labor markets, capital markets
Corporate control very problematic basis of business/competition so different (Local norms vs.
MNC)
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04/21/23 Dave Garten – Business Strategy 22
Strategies for Emerging Markets
Convertibility of profit
Lon
g T
erm
Mar
ket P
oten
tial
Low High
Low
Hig
h Leading MarketsChina, India, Brazil
Aggressive Investments
Chile, Czech, South Africa
Platform InvestmentsRussia
Trailing MarketsSub-Saharan Africa
Source: New Strategies in Emerging Markets by David J Arnold and John A Quelch, SMR, 1998.
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04/21/23 Dave Garten – Business Strategy 23
Implications for International Strategy
Global expectations change the game Standards set at the global level -> launch
globally
Global sourcing Clusters of competitive advantage are dispersed
Suppliers, consumers, R&D, marketing, production
Productivity a key criteria for placement
Managed tension of global vs. local Commonality (efficiency) w/ local requirements Overseas assignments, frequent communication“A desk is a very dangerous place
from which to view the world…”