global environment & strategy

7/21/2019 Global Environment & Strategy

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The Global Environment&

Strategy

- Dr. Sandeep Vij


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Projected Economic Growth


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Labor o!t! and Location Deci!ion!


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o"ntervailing #orce!$ Global

%ntegration v!. Local e!pon!ivene!!

Pressures for global integration

Globalization of markets: the convergence of customerpreferences for similar products, minimal costs, and maximumvalue

[A commodity serves a universal need across countries and cultures and istraded strictly on the basis of price.]

Globalization of production: efficiency gains via stan-dardization, ie, the maximization of location economies

Pressures for local responsiveness !ustomer divergence: differences in culture, national attitudes,and economic and usage conditions

"ost government policies: economic freedom, #ork-place andproduct regulation, buy-local legislation, etc


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The Global %ntegration' Local

e!pon!ivene!! Grid

$he integration%responsiveness grid &'() profiles theinteraction of the pressures for global integration andpressures for local responsiveness

Integration: the process of combining differentiated parts intoa standardized #hole

Responsiveness: the process of disaggregating a standardized#hole into differentiated parts

$he '( grid reveals ho# a firm*s choice of strategy is afunction of the relationship bet#een its idea of value creationand the pressures for integration and%or responsiveness as itlooks to international markets for gro#th opportunities, costreductions, and risk diversification


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The %ntegration' e!pon!ivene!! Grid

and %nd"!try Type!


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The %ntegration' e!pon!ivene!! Grid

and Strategy Type!


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Strategic (lternative!$ The

%nternational Strategy

International strategy: opportunistic expansion intoforeign operations that leverages the firm*s core&domestic) competencies

+ltimate control and decision-making reside at headuarters alue is created by transferring core competencies and uniue

offerings from headuarters into foreign markets #here rivalsare unable to develop, match, or sustain them

'nternational activities are generally secondary to the prioritiesof the domestic marketHeadquarters ethnocentric orientation i.e. its home country focus may

lead to significant missed mar!et opportunities.


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)"ltidome!tic Strategy

"ultidomestic strategy: expansion into foreign opera-tionsthat grants decision-making authority to local managersand emphasizes responsiveness to local conditions

.ecision-making is decentralized so that offerings can be ad/usted tomeet the needs of individual countries or regions

alue is created by giving local managers the authority to respond touniue local cultural, legal, and economic environments

$he polycentric vie# holds that people #ho are close to the market

both physically and culturally can best run a business#he distribution of decision$ma!ing authority to local managers may

lead to duplication in activities significantly higher costs andunusually po%erful &autonomous' local subsidiaries.


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Strategic (lternative!$ The Global

Strategy

(lobal strategy: expansion into foreign operations thatchampions #orld#ide consistency, standard-ization, andcost competitiveness

0lthough activities are dispersed to the most favorable globallocations, decision-making remains highly cen-tralized atheaduarters

alue is created by designing products for a #orld market andmanufacturing and marketing them as effectively and

efficiently as possible Global firms strive to convert global efficiency into price

competitiveness via production and location economies

In mar!ets %here demand for local responsiveness remains high global strategiesare largely ineffective and mar!et opportunities are missed.


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Tran!national Strategy

#ransnational strategy: expansion into foreign opera-tions thatexploits location economies, leverages core competencies,and responds to key local conditions

$he causes of interactive global learning and #orld#ide informationsharing are championed

alue is created by the relentless rene#al, enhancement, andexchange of ideas, products, and processes across functions andborders

$he transnational 123 differentiates capabilities and contribu-tions#hile finding #ays to systematically learn and ultimately integrateand diffuse kno#ledge, thus developing more po#erful corecompetencies

Realistically the transnational firm faces serious challenges to its attempts toefficiently and effectively configure and coordinate its activities.


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