BN926 Strategy and Management of Change

1. BN926 Strategy and Management of Change �Globalisation, Global and International Strategy� Professor Julian Lowe

3. Examples Steel, ICT, Auto, Banking,Retailing, (fast) food Early drivers Changes over the past decade in their patterns of globalisation

10. The big stories� Emerging economies: their increasing impact�� Globalization of production Global strategies Global organization

11. Some recent data From the McKinsey Quarterly no 3 2006, the Economist September 14 2006

24. Globalisation Traditional Reasoning: Market Access Technology Sharing Specialisation of Assets Low Cost / Efficient Inputs Serve Homogeneous Markets Trends in World Trade �..Facilitation through Information Age

25. What Does It Mean? Strategic interdependence Global sourcing Converging tastes and technologies

27. Changing Patterns of Globalisation

28. Changing Patterns of Globalisation (Continued)

29. The new millennium Increasingly borderless world � but not as global as we might think. Of the top 25 largest US multinationals, 22 have over 50% of their sales in North America Flight from manufacturing Growth of alliances although not as marked in China where the growth has been in wholly owned foreign enterprises FDI from developing countries � resources, Oil/Gas, electronics Cultural convergence in some markets Growth of regional agglomerations � clusters. But sometime through a double cluster � MNEs get advantage from a home AND an overseas cluster.

31. Industry Drivers (Yip) Market Homogenous customer needsGlobal (B2B) customers /  middlemen Transferable marketing Cost Scale and scopeLearning and experienceCountry costsSourcing efficienciesProduct development

32. 3 considerations: National resource conditions: What are the major resources which the product requires? Where are these available at low cost? Firm-specific advantages: to what extent is the company�s competitive advantage based upon firm-specific resources and capabilities, and are these transferable? Tradability issues: Can the product be transported at economic cost? If not, or if trade restrictions exist, then production must be close to the market.

33. Drivers of Global Strategy in a Knowledge Economy

34. Limits to Globalisation

35. How global is Unilever?

36. Other frameworks Stages of development � Ohmae, The small firm perspective - Oviatt and McDougall Porter � competitive diamond

37. Five Stages of Globalisation (Ohmae) The Five Stages of Globalisation Export-Orientated Company Overseas Branches Relocating Production Insiderisation The Global Company

38. The Five Stages of Globalisation

39. The Five Stages of Globalisation

40. Global Success Factors Ohmae: Vision and values Strategy � breadth, scope, focus, cost, differentiation People Training and Development Location, Delegation, Control Government

41. Oviatt and McDougall (Journal of International Business Studies,1994 and 2003) Challenge the Process Theory of Internationalization (PTI) (Johanson and Vahlne, 1977) � which states that young or small firms start internationalizing by going through a process whereby they start with activities in countries that are psychically close and then move outwards. Instead Oviatt and McDougal suggest that increasingly SMEs and INVs (international new ventures), more or less start international from the beginning. These firms are typified by ownership of; A scarce and difficult to imitate resource that is transferable internationally A network to help manage and monitor the relationship A initial client who provides them with some immediate experience

42. International New Ventures The whole process is facilitated by The internet and better communications Available information and converging economies and tastes More managers and entrepreneurs with some international experience Improved mechanisms for managing networks

43. Extends and modifies traditional theory of comparative advantage to take account of the following factors: Competitive advantage is about companies --- the importance of the national environment is providing a home base for the company Sustained competitive advantage depends upon dynamic factors-- innovation and the upgrading of firm�s resources and capabilities The critical role of the national environment is its influence upon the dynamics of innovation and upgrading

44. 1. FACTOR CONDITIONS. �Home grown� resources and capabilities more important than natural endowments 2. RELATED AND SUPPORTING INDUSTRIES. Competitive advantage occurs in �industry clusters� (e.g. semiconductors-computers-software in the U.S.) 3. DEMAND CONDITIONS. Discerning domestic customers drive quality and innovation (e.g. Japanese camera industry) 4. STRATEGY, STRUCTURE, RIVALRY. E.g. domestic rivalry drives innovation and upgrading

45. Who manages global organizations?

46. Analysing Management Roles

47. TRANSACTIONS DIRECT INVESTMENT Exporting: Exporting: Exporting: Licensing Franchising Joint Wholly owned Spot Long-term with foreign technology venture subsidiary trans- contract distributor/ and Marketing & Fully Marketing Fully actions agent trademarks distribution integral- & sales integral- only ted only ted Key issues: Is the firm�s competitive advantages based upon firm-specific or country-specific resources and capabilities? Is the product tradable and what are the barriers to/ costs of trade? Does the firm possess the full range of resources and capabilities needed to serve the overseas market?

48. Entry modes These entry modes depend on transaction costs, and the need for risk reduction and control These factors also help explain the different MNE/Transnational structures that follow:

49. The European MNC as Decentralized Federation : National subsidiaries self-sufficient and autonomous Parent control through appointment of subsidiaries senior management Organization and management systems reflect conditions of transport and communications at the time e.g. Unilever, Phillips, Courtaulds, Royal Dutch/Shell

50. American MNC�s as Coordinated Federations : National subsidiaries fairly autonomous Dominant role as U.S. parent-- especially in developing new technology and products Parent-subsidiary relations involved flows of technology and finance, and appointment of top management.e.g. Ford, GM, Coca Cola, IBM

51. The Japanese MNC as Centralized Hub Pursuit of global strategy from home base Strategy, technology development, and manufacture concentrated at home National subsidiaries primarily sales and distribution companies with limited autonomy. e.g. Toyota, NEC, Matsushita

52. The Transnational: an integrated network of distributed interdependent resources and capabilities. Each national unit and source of ideas, skills and capabilities that can be harnessed to benefit whole corporation. National units become world sources for particular products, components, and activities. Corporate center involved in orchestrating collaboration through creating the right organizational context.

53. Outline Porter�s, Ohmae�s, Oviatt and McDougall�s, and Yip�s theories of globalisation and strategy How would you design a global strategy and organisation in: Healthcare? IT? Mining and primary production? Software? Questions