Quản trị kinh doanh - Global strategies and the multinational corporation

Global Strategies and the Multinational CorporationImplications of International Competition for Industry AnalysisAnalyzing Competitive Advantage within an International ContextApplying the Framework (1) International location of production (2) Foreign market entry strategiesMultinational Strategies: Globalization versus National DifferentiationStrategy and Organization of the Multinational CorporationOUTLINEThe Internationalization Process International Global Industries Industries --aerospace --automobiles --military hardware --oil --diamond mining --semiconductors --agriculture --consumer electronics Domestic Multinational/ Industries Multidomestic --railroads Industries --laundries/dry cleaning --investment banking --hairdressing --hotels --milk --consultingInternational TradeForeign Direct InvestmentLO WLOWHIGHHIGHThe Automobile Goes Global: The GM Pontiac Le MansDesign: Germany (by Opel) Brakes: France, U.S.Sheetsteel: Japan S. KoreaStamping of body parts: S. Korea Tires: S. KoreaEngines: 1.6 liter S. Korea Windshield: S. Korea 2.0 liter Australia Battery: S. KoreaFuel injection: U.S. Wiring harness: S. KoreaFuel pump: U.S. Radio: SingaporeTransmission: Canada & U.S. Assembly: S. KoreaRear axle: U.S. Marketing & Steering: U.S. distribution: N. America Implications of Internationalizationfor Industry AnalysisINDUSTRY STRUCTURELower entry barriers around national marketsIncreased industry rivalry --- lower seller concentration --- greater diversity of competitorsIncreased buyer power: wider choice for dealers & consumersCOMPETITION Increased intensity of competitionPROFITABILITY Other things remaining equal, internationalization tends to reduce an industry’s margins & rate of return on capitalCOMPETITIVE ADVANTAGETHE INDUSTRY ENVIRONMENTKey Success FactorsFIRM RESOURCES & CAPABILITIES-- Financial resources-- Physical resources-- Technology-- Reputation-- Functional capabilities-- General management capabilitiesTHE NATIONAL ENVIRONMENT-- National resources and capabilities (raw materials; national culture; human resources; transportation, communication, legal infrastructure-- Domestic market conditions-- Government policies-- Exchange rates-- Related and supporting industriesCompetitive Advantage within an International Context: The Basic FrameworkNational Influences on Competitiveness: The Theory of Comparative Advantage A country has a relative efficiency advantage in those products that make intensive use of resources that are relatively abundant within the country. E.g.Philippines relatively more efficient in the production of footwear, apparel, and assembled electronic products than in the production of chemicals and automobiles.U.S. is relatively more efficient in the production of semiconductors and pharmaceuticals than shoes or shirts.When exchange rates are well-behaved, comparative advantage becomes competitive advantage.Revealed Comparative Advantage fora Certain Broad Product Categories USA Canada W. Germany Italy JapanFood, drink & tobacco .31 .28 -.36 -.29 -.85Raw materials .43 .51 -.55 -.30 -.88Oil & refined products -.64 .34 -.72 -.74 -.99Chemicals .42 -.16 .20 -.06 -.58Machinery and trans- .12 -.19 .34 .22 .80portation equipmentOther manufacturers -.68 -.07 .01 .29 .40Note: Revealed comparative advantage for each product group is measured as: (Exports less Imports)/ Domestic productionPorter’s Competitive Advantage of Nations Extends and adapts traditional theory of comparative advantage to take account of three factors:International competitive advantage is about companies not countries—the role of the national environment is providing a home base for the company.Sustained competitive advantage depends upon dynamic factors-- innovation and the upgrading of resources and capabilities The critical role of the national environment is its impact upon the dynamics of innovation and upgrading. FACTOR CONDITIONSDEMAND CONDITIONSRELATING ANDSUPPORTINGINDUSTRIESSTRATEGY, STRUCTURE,AND RIVALRYPorter’s National Diamond FrameworkFACTOR CONDITIONS—“Home grown” resources/capabilities more important than natural endowments.2. RELATED AND SUPPORTING INDUSTRIES—Key role of “industry clusters”3. DEMAND CONDITIONS—Discerning domestic customers drive quality & innovation4. STRATEGY, STRUCTURE, RIVALRY. E.g. domestic rivalry drives upgrading.Consistency Between Strategy and National Conditions In globally-competitive industries, firm strategy needs to take account of national conditions:U.S. textile manufacturers must compete on the basis of advanced process technologies and focus on high quality, less price-sensitive market segmentsIn the semiconduictor industry, CA-based firms concentrate mainly upon design of advanced chips, Malaysian firms concentrate upon fabrication of high volume, less technologically advanced items (e.g. DRAM chips)Dispersion of value chain to exploit different national environments (e.g. Nike conducts R&D in US, components in Korea and Thailand, assembly in Indonesia, China, and India, marketing in Europe and North America)International Location of Production3 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.The Role of Labor CostsHourly Compensation for Production Workers, 1999 ($) Germany 26.93 Japan 20.89 U.S. 19.20 France 19.98 U.K. 16.56 Spain 12.11 Korea 6.75 Mexico 2.12BUT, wages are only one element of costs: Cost of Producing a Compact Automobile U.S. Mexico Parts & components 7,750 8,000 Labor 700 40 Shipping cost 300 1,000 Inventory 20 40 TOTAL 8,770 9,180Location and the Value ChainComparative advantage in textiles and apparel by stage of processingHong Kong 1 -0.96 2 -0.81 3 -0.41 4 +0.75Italy 1 -0.54 2 +0.18 3 +0.14 4 +0.72Japan 1 -0.36 2 +0.48 3 +0.48 4 -0.48U.S.A. 1 +0.96 2 +0.64 3 +0.22 4 -0.73Country Stage Index of Country Stage Index of of Revealed of Revealed Processing Comparative Processing Comparative Advantage AdvantageNote: 1 = production of fiber (natural & synthetic) 2 = production of spun yarn3 = production of textiles 4 = production of clothingThe optimal locationof activity X consideredindependentlyWHERE TO LOCATEACTIVITY X?The importance of linksbetween activity X andother activities of the firmWhere is the optimal locationof X in terms of the cost andavailability of inputs?What government incentives/ penalties affect the location decision?What internalresources and capabilities does the firm possess in particular locations?What is the firm’s business strategy (e.g. cost vs. differentiation advantage)?How great are the coordinationbenefits from co-locating activities?Determining the Optimal Location of Value Chain Activities TRANSACTIONS DIRECT INVESTMENTExporting: Exporting: Exporting: Licensing Franchising Joint Wholly ownedSpot Long-term with foreign technology venture subsidiary trans- contract distributor/ and Marketing & Fully Marketing Fully actions agent trademarks distribution integral- & sales integrated only ted onlyAlternative Modes of Overseas Market EntryKey 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?Can the firm directly appropriate the returns to its resources?What transaction costs are involved?Alliances and Joint Ventures: Management IssuesBenefits: --Access to the resources and capabilities of another company --Learning from one another --Reducing time-to-market for innovations --Risk sharingProblems: --Disagreements & conflict between the partners. Disputes most likely where the partners are also competitors.Benefits are seldom shared equally. Distribution of benefits determined by:Strategic intent of the partners- which partner has the clearer vision of the purpose of the alliance?Appropriability of the contribution—which partner’s resources and capabilities can more easily be captured by the other?Absorptive capacity of the company-- which partner is the more receptive learner? Alliances and Joint Ventures: Management IssuesBenefits: --Combining resources and capabilities of different companies --Learning from one another --Reducing time-to-market for innovations --Risk sharingProblems: --Management differences between the two partners. Conflict most likely where the partners are also competitors.Benefits are seldom shared equally. Distribution of benefits determined by:Strategic intent of the partners- which partner has the clearer vision of the purpose of the alliance?Appropriability of the contribution-- which partner’s resources and capabilities can more easily be captured by the other?Absorptive capacity of the company-- which partner is the more receptive learner? SUZUKIISUZUTOYOTAIBC VehiclesLimited (U.K.)GMNew United MotorManufacturingInc. (NUMMI)Supplies small cars10%owned49%ownedSupplies small cars/ trucks/parts40% investment60%owned50%owned50%ownedMakes vans in UKMakes cars in USSAAB50%ownedFIAT20%ownedCollaboration on technology and componentsFUJI20%owned; joint productionDAEWOOSupplies small carsGeneral Motors’ Alliances with Competitors Analyzing benefits/costs of a global strategyForces for globalizationMARKET DRIVERS--Similarity of needs--Appeal of foreign-ness--Network effectsCOST DRIVERS--Scale--Learning --National differences in resource costsCOMPETITIVE DRIVERS--Strategic competition (X subsidization)Forces for localization / national differentiationMARKET DRIVERS--Different customer preferences--Cultural differencesCOST DRIVERS--Transportation costs--Transaction costs --Economic & political risk (+ or -?)--Speed of responseGOVERNMENT DRIVERS--Barriers to trade & inward inv.--RegulationsMultinational Strategies: Globalization vs. National DifferentiationNational preferences in decline—world becoming a single, if segmented, marketAccessing global scale economies—in purchasing, manufacturing, product development, marketing.Strategic strength from global leverage—ability to cross- subsidize a national subsidiary with cash flows from other national subsidiaries Need to access market trends and technological developments in each of the world’s major economic centers- N. America, Europe, East Asia.Hamel &PrahaladThesisKenichi Ohmae’s“Triad Power”ThesisTed Levitt“Globaliz--ation ofMarkets” ThesisThe case for a global strategy:The Evolution of Multinational Strategies and Structures: (1) 1900-1939—Era of the EuropeansThe European MNC as Decentralized Federation :National subsidiaries self-sufficient and autonomousParent control through appointment of subsidiaries senior managementOrganization and management systems reflect conditions of transport and communications at the time e.g. Unilever, Phillips, Courtaulds, Royal Dutch/Shell. The Evolution of Multinational Strategies and Structures: (2) 1945-1970—U.S. DominanceAmerican MNC’s as Coordinated Federations : National subsidiaries fairly autonomousDominant role as U.S. parent-- especially in developing new technology and productsParent-subsidiary relations involved flows of technology and finance, and appointment of top management.e.g. Ford, GM, Coca Cola, IBM The Evolution of Multinational Strategies and Structures: (3) 1970s and 1980s—The Japanese ChallengeThe Japanese MNC as Centralized HubPursuit of global strategy from home baseStrategy, technology development, and manufacture concentrated at homeNational subsidiaries primarily sales and distribution companies with limited autonomy. e.g. Toyota, NEC, MatsushitaMatching Global Strategies and Structures to Industry ConditionsDegree of globalization depends upon the benefits of globalintegration versus the benefits of national differentiation.Key issues: --How important are global scale economies? --How different are customer requirements between countries?Benefits of national differentiation Benefitsof global integration Cement Telecommunicationsequipment Packaged grocery products Jet enginesConsumer electronicsMarketing Global Strategies and Situations to Industry Conditions: Firm Success in Different IndustriesConsumer Electronics Branded, Packaged Telecommunications Consumer Goods Equipment - Global industry - Substantial national - Requires both global - Matsushita the most differentiation, few global integration and national successful scale economies differentiation. - Philips the survivor - Kao has limited success - NEC only partially - GE sold out outside Japan successful - Unilever and P&G most - ITT sold out successful - Ericsson most successfullocal responsiveness local responsiveness local responsivenessglobal integrationglobal integrationglobal integrationMatsushitaPhilipsGeneral ElectricKaoP&GUnileverNECEricksonITTTight complex controls and coordination and a shared strategic decision process.Heavy flows of technology, finances, people, and materials between interdependent units.Figure 14.8. The Transnational Corporation Reconciling Global Integration with National Differentiation: The Transnational CorporationThe 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.Tight complex controls and coordination and a shared strategic decision process.Heavy flows of technology, finances, people, and materials between interdependent units.On what basis to organize—products, geography, functions?--Where is coordination most important?--How global is the industry? How global is the firm’s strategy? If one dimension is dominant, how to coordination along the other dimensions? --Maintain single line accountability--Other dimensions of coordination can be “dotted line” relationsWhat’s the role of HQ?--Control function--Coordination function--Exploiting scale economies in centralized provision of servicesThe need for internal differentiation --By product/business --By function --By countryFormal & informal organizationDesigning the MNC: Key Learning