Globalization of Strategy

MGMT 480

Dr. Keith Robbins

Meagan DenOuden

Globalization

Process of closer integration and exchange between different countries and peoples world-wide

Made possible by: Falling trade and investment barriers

Advancements in telecommunications

Reduced transportation costs

Why Globalize?

Resource-based: resources are the key to a firms superior performance

Superior Craftsmanship: better/cheaper labor in different countries

Transportation costs: decrease costs by having warehouse in country

Better production efficiency Avoid political, trade, and regulatory rules Gain access to a larger market

Why Globalize?

Competitive Disadvantage

If you are not global in your reach and your rivals are…

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Dominant Multinational Market Groups

The G-7 Nations NAFTA – (soon to be AFTA?) Pacific Rim /Asia EU

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Formerly the G8 (Russia) These meetings of the leaders of the United States, Britain, Italy, Japan, France, Germany, and Canada are the way the powerful industrialized nations of the world seek to work out differences between themselves and arrive at policies that can reduce conflict and other problems elsewhere.

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The Group of 7 Nations

The European Union

Austria, Belgium, Bulgaria, Croatia, Cyprus (Greek part) Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy,

Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia,

Slovenia, Spain, Sweden, United Kingdom

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Evolutionary Development of a Global Corporation

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1. Export-import activity

2. Foreign licensing and technology transfer

3. Direct investment in overseas operations (manufacturing plants and global management skills)

4. Substantial increase in foreign investment (foreign assets comprise significant portion of total assets)

Evolution of a global firm

entails progressively

involved strategy levels

Comparative Management Framework

Compare and Contrast the Management Models, Practices, Principles, Strategies, Policies…Across Classes of Organizations

Could be Profit vs Not-For-Profit, Small vs Large , Private vs Public

Most Often Concerned with Comparative Analysis Among Different Regions of World

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Multi-domestic Strategy

Also known as localization strategy Maximize local responsiveness, hoping that local

consumers will perceive them to be domestic

Be perceived as local.

Multi-domestic Strategy

Pros Reduced exchange-rate

exposure Value creation in host

country

Cons Costly and inefficient Highly autonomous

units

Multi-domestic Strategy Examples

McDonalds China: Rice McWraps Italy: Pizzarotto Saudi Arabia: Mc Arabia

Chicken India: No beef → mutton-

based and vegetarian burgers

Lowered prices based on average income

Heinz Always sell ketchup China → soy sauce Indonesia → chili

sauces Brazil → tomato

sauces

Multi-domestic Strategy Examples

Hard Rock Cafe Hawaii → fresh fish Retail shops → carry

location specific items London: t-shirts with

London written on it

Prague: signature pins

MTV Feeds for UK and

Ireland Feeds for Germany,

Austria, and Switzerland

Feeds for Scandinavia, Italy, France, Spain, and Holland

Global Strategy Attempts to reap significant economies of scale and

location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost

Arises due to: High pressure for cost reductions

Low pressure for local responsiveness

Lowest costs possible.

Global Strategy

Pros Obtain the lowest costs Economies of scale

Cons If you can’t get the

lowest costs you won’t succeed

No local responsiveness

No product differentiation

Global Strategy Examples

Lenovo Computer

Manufacturers; Makers of the ThinkPad

Hubs in Beijing, Shanghai, Raleigh, and Japan

Manufacturing in Mexico, India, and China

Walmart Tried to enter

Germany Wanted door

greeters and polite staff

Couldn’t gain enough market share and keep their costs low

Transnational Strategy

Also called glocalization Attempts to combine the benefits of a localization

strategy with those of a global strategy High local-responsiveness and lowest cost

attainable

Think globally, act locally.

Transnational Strategy

Pros Economies of scale Location Learning

Cons Costly and difficult to

implement Exchange rate

exposure

Transnational Strategy Examples

Unilever Brand & innovation

lead to lower environmental impact

Sustainable growth operations in multiple continents

Create a positive social improvement

Coca-Cola Retains the same

secret formula in each country

Sells in 200 countries world-wide

Bottles will be in local language