Lecture 1 - Introduction to Global Strategy 2024 PDF

Global Strategy Introduction Fotini Claire Parnassa Global Companies National Governments Press/Media Trade Labor Unions Scientific/Academic Institutions NGOs National Companies Religious Groups/Churches United Nations https://globescan.com/wp-content/uploads/2017/07/Trust-in-Glo...

Global Strategy Introduction Fotini Claire Parnassa Global Companies National Governments Press/Media Trade Labor Unions Scientific/Academic Institutions NGOs National Companies Religious Groups/Churches United Nations https://globescan.com/wp-content/uploads/2017/07/Trust-in-Global-Companies-GlobeScan-Public-Opinion-eBrief-Feb2016.pdf Strategy from greek “stratos” (army) and “agein” (to lead) The Battle of Thermopylae 480 BCE Xerxes I Leonidas King of Kings of King of Sparta the Persian Empire 7,000 Warriors 150,000 Warriors One Greek had to kill 21 Persians 6 img1.wikia.nocookie.net/__cb20121029224654/godofwar/images/b/be/1959833- en.wikipedia.org/wiki/Xerxes_I#/media/File:Xerxes_Image.png www.zoom-cinema.fr/media/photos/news/4498/xerxes.JPG https://en.wikipedia.org/wiki/Leonidas_I#/media/File:Leonidas_I_of_Sparta.jpg king_leonidas.jpg How to Fight the Impossible Battle? 7 QUESTIONS Define strategy: Alfred Chandler, Michael Porter, Peter Drucker, Henry Mintzberg Which are the three horizons for strategy? What are: vision, mission, values and objectives (provide examples) a strategy statement (provide examples) Explain the three (or four) generic business strategies with examples. Explain the main corporate strategies with examples using the Ansoff matrix. What is a value chain? SWOT and TOWS, PESTEL, Porter’s 5 Forces, VRIO 9  Old paradigm Global firms are ‘home’-country firms that invest in foreign countries. New paradigm Global firms are not necessarily located in their country of origin. Managed as networks in an integrated and coordinated way out of ‘centers’ ‘transnational’ or ‘metanational’ https://miro.medium.com/max/1200/1*zxAC5k8QjhqVw47KRgCnsA.jpeg Lasserre (2017). Global Strategic Management Before the 1970s we talked about ‘multinational’ companies (some operating all over the world at the end of the 19th century, but nobody would have called them global). early 1970s the global concept Lasserre (2017). Global Strategic Management Globalization process of increased interconnectedness and interdependence among countries (economies, cultures, societies, political systems) through the flow of goods, services, capital, information, technology, and people across national borders Example: interconnectedness of Financial Institutions https://www.researchgate.net/figure/A-sample-of-the-international-financial-network-where-the-nodes- represent-major_fig1_26692139 Globalization process of increased interconnectedness and interdependence among countries (economies, cultures, societies, political systems) through the flow of goods, services, capital, information, technology, and people across national borders Of Markets Of Production Merging of historically distinct Sourcing of goods and services from national markets into a large global locations around the globe to take marketplace advantage of national differences in costs and quality factors of production (e.g., labor, energy, land, capital) – fragmentation of operations – geographic concentration Value Chain M. Porter, from Competitive Advantage: Creating and Sustaining Superior Performance, 1985 Value chain vs. Supply chain Global Value Chain What are Global Value Chains and why they matter for economic & regional development | LSE Research (youtube.com) Why do companies globalize? Markets Resources Competitiveness To capture new markets Natural resources Economies of scale Knowledge Costs Security of supply Networks Risk spreading How do companies globalize? 1. The traditional path Lasserre, Philippe. (2012) Global Strategic Management https://www.business.att.com/content/dam/attbusiness/images/image-and-text/imagetext-highlights-cs-otis.jpg https://i1.wp.com/americanbusinesshistory.org/wp-content/uploads/2021/07/Otis-top-pic.jpeg?fit=800%2C497&ssl=1 Example: OTIS Multinational competitive configuration Global competitive configuration Lasserre, P. (2017). Global Strategic Management. Springer. By the 1960s European Economic Community (EEC), at that time called the Common Market: tariff barriers across Europe were coming down produce components in a specialized factory in one country and export them to other countries. Have a network of specialized factories making one component. Components would be cross- shipped for ultimate installation in the various client countries. Why was it possible? standardization (as long as the same elevators were needed by architects for buildings in Europe) What benefits? economies of scale, lower prices and thus higher market share, greater profit margin Lasserre, P. (2017). Global Strategic Management. Springer. How do companies globalize? 2. Some companies are born global  Political/Economic Drivers of Globalization Drivers Trade policies Stability Economic reforms International institutions Tech Drivers Social/Market Drivers Com & Info tech Cultural convergence Transportation Global mobility Globalization Manufacturing Global media FinTech Urbanization Digital Marketing Consumer needs Competitive Drivers Market saturation Competitive pressure Economies of scale Access to resources Drivers of Globalization Political/Economic Reduction of tariffs Drivers Elimination of quotas Trade policies Privatization Economic reforms Intellectual Property Rights laws International institutions Immigration policies Stability Tax incentives for foreign investors  Regional Comprehensive Economic Partnership (RCEP) Drivers of Globalization 15 nations including China, Australia, Japan, Malaysia, New Zealand, Singapore, Cambodia, Vietnam United States-Mexico-Canada Agreement (USMCA) Previously NAFTA Covering digital trade, fighting corruption and regulatory standards Political/Economic Comprehensive and Progressive Agreement for Trans-Pacific Partnership Drivers (CPTPP) Trade policies Launched in 2018 with Japan, Malaysia, Vietnam, Australia, Singapore, Stability Brunei Darussalam, New Zealand, Canada, Mexico, Peru and Chile as Economic reforms members. The UK joined them in 2023 International institutions The European Union African Continental Free Trade Area (AfCFTA) 55 countries Southern Common Market (Mercosur) https://www.weforum.org/age Set up by Argentina, Brazil, Paraguay and Uruguay. Suriname, Guyana, nda/2023/04/growth-summit- Colombia, Ecuador, Peru, Chile and Bolivia have associate status. 2023-world-biggest-trading- blocs/ Drivers of Globalization World Trade Organization (previously GATT): to promote the lowering of barriers to cross-border trade and investment to facilitate multinational agreements International Monetary Fund – IMF Political/Economic to maintain order in the international monetary system Drivers to lend to nation-states whose economies are in turmoil Trade policies Stability World Bank Economic reforms to promote economic development International institutions to make low-interest loans to poor nations that wish to build important infrastructure United Nations - UN To preserve peace and security To promote higher standards of living, full employment, conditions of social and economic progress Drivers of Globalization Tech Drivers Transportation Com & Info tech Manufacturing FinTech Digital Marketing Drivers of Globalization Social/Market Drivers Cultural convergence Global mobility Global media Urbanization Consumer needs Sao Paolo Mumbai L.A. Drivers of Globalization Social/Market Drivers Cultural convergence Global mobility Global media Urbanization Consumer needs Drivers of Globalization Social/Market Drivers Cultural convergence Global mobility Global media Urbanization Consumer needs the less cultural more likely to be standardized the more technical  Cost Benefits Benefits of Globalization Economies of scale Bargaining power over suppliers Sourcing Timing Benefits Arbitrage Benefits International product Globalization Reduce risks life cycle Diversification Learning Benefits Pilot Transfer Best practices Push for Localization Political/Legal Factors Regulations National security Tech Factors Cultural Factors Standards Attitudes, behaviors Transportation Localization Tastes Spatial presence Social codes Languages Commercial Factors Distribution networks Customization Responsiveness Benefits of Localization Flexibility Adapt to customer demands Localization Quick Response Proximity Time Being close to the Respond to market customer demands promptly Exercise Position the following businesses on the Global Integration/Local Responsiveness Grid Microchips Pharmaceuticals Telecommunication services Internet service providers Automobile Military aircraft Civil aircraft Chemicals Food retailing Packaged food Exercise Exercise Exercise Exercise High Globalization Forces Low Low High Localization Forces Four Internationalization Bartlett & Ghoshal’s model Strategies stronger Transnational Global Strategy Strategy Pressures for Global Integration Multidomestic Export Strategy Strategy weaker weaker stronger Pressures for Local Responsiveness Four International Strategies A global strategy involves treating the world A transnational strategy seeks to balance the as a single market, with standardized efficiency of global operations with the need for products or services across all countries. local responsiveness. It also maximizes learning The focus is on achieving economies of scale and knowledge exchange between its dispersed and consistency across international units. Coordination is neither centralized at markets, with minimal customization. This home nor dispersed. strategy is typically used when the same product can meet customer needs worldwide. An export strategy involves a company A multidomestic strategy involves tailoring producing goods in its home country and then products, services, and marketing to fit the exporting them to foreign markets. The specific needs and preferences of each local business retains its production operations market. The company decentralizes its domestically and focuses on selling its operations, allowing local subsidiaries to products or services abroad, typically without adapt products and strategies to the culture significant customization to local markets. and consumer demands in different countries. Four International Strategies To be able to identify business development opportunities, an organization needs to know what gives it competitive advantage. Tools that help identify what an organization does well: SWOT, Value Chain analysis, VRIO framework