Strategic Management PEARCE & ROBINSON

1. Chapter 4 The Global Environment: Strategic Considerations for Multinational Firms

3. What is Globalization? The strategy of approaching worldwide markets with standardized products

4. Development of a Global Corporation Evolution of a global firm entails progressively involved strategy levels 1. Export-import activity 2. Foreign licensing and technology transfer 3. Direct investment in overseas operations 4. Substantial increase in foreign investment

8. Ex. 4-5: Orientation of a Global Firm Batch production Mass production Technology Host country Home country Culture Hierarchical area divisions, with autonomous national divisions Hierarchical product divisions Structure National responsiveness Global integration Strategy Bottom-up Top-down Governance Public acceptance (legitimacy) Profitability (viability) Mission Polycentric Ethnocentric

9. Ex. 4-5 (contd.) Local people developed for key positions in their country People of home country developed for key positions everywhere Personnel practices Retention of profits in host country Repatriation of profits to home country Finance Local product development based on local needs Product development determined by needs of home-country customers Marketing

10. Ex. 4-5: Orientation of a Global Firm Global Regional Culture Network of organization (includes stakeholders and competitors) Product and regional organization tied through a matrix Structure Global integration and national responsiveness Regional integration and national responsiveness Strategy Mutually negotiated at all levels of the corporation Mutually negotiated between region and its subsidiaries Governance Same as regiocentric Both profitability and public acceptance Mission Geocentric Regiocentric

11. Ex. 4-5 (contd.) Best people everywhere developed for key positions everywhere Regional people developed for key positions anywhere in region Personnel practices Redistribution globally Redistribution within region Finance Global product, with local variations Standardize within region, but not across regions Marketing Flexible manufacturing Flexible manufacturing Technology

15. Stakeholder Activism Refers to demands placed on the global firm by the foreign environments in which it operates, principally by foreign governments

16. Multidomestic and Global Industries A multidomestic industry is one in which competition is essentially segmented from country to country A global industry is one in which competition crosses national borders

24. Ex. 4-9: Location and Coordination Issues of Functional Activities Manage suppliers located in different countries Location of the purchasing function Purchasing Interchange among dispersed R&D centers Number and location of R&D centers Research and Development Similarity of service standards and procedures worldwide Location of service organization Service Commonality of brand name; coordination of sales; similarity of channels and product positioning; coordination of pricing Product line selection; country market selection Marketing Networking of international plants Location of production facilities for components Operations Coordination issues Location Issues Functional Activity

25. Ex. 4-10: Market Requirements and Product Characteristics – The Model Rate of Change of Product Fast Slow Standardized in all markets Customized market-by-market Maintain differentiation Operate an ever-changing “global warehouse” Minimize delivered cost Practice opportunistic niche exploration

26. Ex. 4-11: International Strategy Options High foreign investment with extensive coordination among subsidiaries Global strategy Country-centered strategy by multinationals with a number of domestic firms operating in only one country Export-based strategy with decentralized marketing High Low Coordination of activities Geographically dispersed Geographically concentrated Location of activities

27. Ex. 4-12: International Strategy Options Joint venture Foreign branch Wholly owned foreign subsidiary Licensing, contract manufacturing , franchising Joint venture Foreign branch Export Licensing, contract manufacturing, franchising Joint venture Market complexity Product diversity Low High High