Week 12 International Context - Strategic Management PDF

SIEN 2210 Strategic Management Week 12 International context Dr. Bart De Keyser Discipline of Strategy, Innovation, & Entrepreneurship The University of Sydney Page 1  What will this unit be covering? Week 1: What is Strategy?...

SIEN 2210 Strategic Management Week 12 International context Dr. Bart De Keyser Discipline of Strategy, Innovation, & Entrepreneurship The University of Sydney Page 1  What will this unit be covering? Week 1: What is Strategy? I. Introduction to strategy Week 2: Missioning and visioning Week 3: Business-level strategy Week 4: Corporate-level strategy II. Strategy Content Week 5: Network-level strategy Week 6: Strategy formation Week 7: Strategic change III. Strategy Process Week 8: Strategic thinking Week 9: Guest lecture: Strategy @ Work Week 10: Industry context Week 11: Organizational context IV. Strategy Context Week 12: International context Week 13: Recap and exam guide The University of Sydney Page 2  Key questions What are the implications when a company "internationalizes"? How should an international company be organized? How significant are differences in the international context for the company, and how should a company deal with them? How interconnected or fragmented are foreign markets? Is there strong integration or rather fragmentation? How to gain insight into international trends and their impact on the business/industry context of a company? Our focus for today in the strategy context… Week 12: International context What to understand under ‘global’?  Discuss: What does ‘globalization’ mean to you? Are there different ways in which we can understand the concept? The University of Sydney Page 6 SCOPE Spatial dimension Regional – National – International - Global “We’re active across the globe” SIMILARITY Being global can relate Variance dimension Global product vs. local product to several “We sell the same product in different countries” dimensions… INTEGRATION Relatedness dimension Related markets vs. loosely coupled markets “Changes in once country spill over to the next” The University of Sydney Page 7  GLOBALIZATION OF ECONOMIES Being global can also Macro level Is there a convergence trend between national relate to several economies? levels… GLOBALIZATION OF BUSINESSES Meso level Is there a convergence trend between customers? These levels are highly interconnected… GLOBALIZATION OF COMPANIES Micro level How globally does a company operate? The University of Sydney Page 8  Video: What is globalization 1. How does the video relate to globalization? 2. How does the video project the future of globalization? Do you agree? The University of Sydney Page 9 Week 12: International context Becoming global The University of Sydney Page 10  Video: How instant noodles went global Watch the video. Explain how instant noodles went global: what was the process? The University of Sydney Page 11  Process of globalization PUSH: Efficiency opportunities Increasingly Economies of Cost Decreasing standardized scale reductions prices products PULL: Customer convergence The University of Sydney Page 12  Example: Aldi The University of Sydney Page 13  Example: Bluey The University of Sydney Page 14  INDUSTRY GLOBALITY Competitive structure: concentrated versus fragmented Customer structure: concentrated versus fragmented Supplier structure: concentrated versus fragmented International demand for products: homogeneous versus heterogeneous Trade and investment policy: liberal versus restrictive More generally, The degree to which an industry's operations, markets, and competitive dynamics are globally interconnected and internationalization integrated. depends on two major INTERNATIONAL MATURITY factors… How much international sales? high versus low Market presence in key markets? high versus low Market share in key markets? large versus small HQ interaction in the distribution network? Large versus small... The experience and sophistication that a company has attained in managing international expansion and operations. The University of Sydney Page 15  STRATEGIES INTERNATIONALIZATION 3. 6. 9. Mature Enter new Prepare for Strengthen business globalization global position International 2. 5. 8. Consolidate Consider expansion Seek global maturity export markets internationally alliances 1. 4. 7. Stay at Seek niches in Prepare for Immature home internationally a buy-out Local Industry Globality Global The University of Sydney Page 16 Week 12: International context International configuration The University of Sydney Page 17  Going international in different ways… The University of Sydney Page 18  The Issue of International Configuration How should the firm organize its activities across borders? 1. International Composition 2. International Management In which countries does a company want to be active How should a company organize itself in order to in and how much involved do they want to be? deal with its border-spanning nature? International Scope International distribution Integration Mechanisms How are the value Which countries are 1. Standardization adding activities selected to do business 2. Coordination distributed across the in? 3. Centralization selected countries? The University of Sydney Page 19  1. International composition In how many countries does a company choose to be active? In which countries is it active? Which activities are carried out in which countries? The University of Sydney Page 20  Discuss: Imagine yourself to be the founder of Rufus and Coco, a pet care brand. You consider developing a foreign subsidiary somewhere other than Australia. How would you decide which countries to move towards? The University of Sydney Page 21  To compose an “All countries are equal, but international ‘portfolio’, some are more equal than organizations should others…” try to make sense of the comparative Some countries or regions have advantages advantages of that can matter significantly in international nations… strategizing. The University of Sydney Page 22  Example: Why has China been so attractive for production? The University of Sydney Page 23  Example: Why has India become dominant in IT? The University of Sydney Page 24  PORTER’S DIAMOND MODEL The University of Sydney Page 25  PORTER’S DIAMOND MODEL FACTOR CONDITIONS Factors of production, including natural resources, human resources, capital, infrastructure, and technological resources. The quality, quantity, and cost of these resources affect a nation's competitiveness in specific industries. DEMAND CONDITIONS The nature of home market demand for an industry's product or service is crucial. Sophisticated and demanding local customers can stimulate companies to innovate and improve their products and services, making them more competitive globally. RELATED AND SUPPORTING INDUSTRIES The presence of related industries and supporting services that are internationally competitive can enhance an industry's competitive advantage. Clusters and networks of interconnected industries often work together to support each other, leading to mutual benefits and improved competitiveness. FIRM STRATEGY, STRUCTURE, AND RIVALRY The conditions in a nation governing how companies are created, organized, and managed, as well as the intensity of domestic competition, play a crucial role. High levels of competition can drive firms to be more innovative and efficient, leading to enhanced global competitiveness. The University of Sydney Page 26  Example: Why are there so many financial companies in the USA? The University of Sydney Page 27  Example: Why is Belgium attractive for diamond traders? The University of Sydney Page 28  2. International management How to coordinate activities across countries? The University of Sydney Page 29  2. International management Three important trade-offs when a company is internationally active… Product/service offering: Global vs. local product Decision-making: Centralized vs. decentralized Value chain activities: Concentrated vs. dispersed To manage these trade-offs and exploit synergies, organizations can… Standardize: Equalizing activities in each country Coordinate: Aligning activities in different countries Centralize: Integrating activities at one central location The extent to which organizations opt for either of these will depend on a host of different parameters, such as competition, regulation, technology… The University of Sydney Page 30  2. International management: A typology E.g., Virgin E.g., Proctor and Group Gamble E.g., Amazon E.g., Toyota Motor Corp. The University of Sydney Page 31  Question: Imagine your company’s headquarters is in Australia. You operate another branch in New Zealand, and one more in Mexico. Which branch would be easier for you to manage internationally – and, most importantly, why? The University of Sydney Page 32  C ULTURAL DISTANCE Differences languages, ethnicities, religions, values, traditions,… A DMINISTRATIVE DISTANCE How different countries are Lack of colonial ties, lack of shared regional trading block, lack of common currency,… managed internationally is dependent on the distance that exists between them… G EOGRAPHIC DISTANCE Physical distance, lack of land border, differences in time zones, differences in climate,… E CONOMIC DISTANCE Rich/poor differences, differences in cost or quality of resources, … The University of Sydney Page 33  Video: A day with Port of Singapore Authorities (PSA)’ executives PSA has a subsidiary in Belgium. How do you think that HQ-subsidiary relationship is, given the CAGE-framework? The University of Sydney Page 34  Example: PSA – Antwerp vs. Singapore “These guys in Singapore don’t know what we are experiencing here in Antwerp.” “The culture is just very different, you know. The decision-making, the way of interacting…” “The different time zones make things much more challenging than communicating with, say, Germany.” “My English is crap. And their Dutch is, of course, non-existent. So that’s a bit of an issue…” The University of Sydney Page 35  ! The relationship between HQ and its subsidiaries is crucial to develop a strong competitive position. However… Building a healthy relationship has proven to be very difficult. The list of companies struggling with HQ-subsidiary interactions is long. The University of Sydney Page 36 Week 12: International context The paradox and perspectives The University of Sydney Page 37  GLOBAL LOCAL SYNERGY RESPONSIVENESS PARADOX Organizations need to align their positions Organizations need to tailor their approach to across countries. This allows them to… the specific region they are in, due to differences in… … better serve customers … customer needs and behaviour … enjoy economies of scale … media structure … optimize their use of resources … infrastructure … roll out best practices … regulations … The University of Sydney Page 38 38  Perspectives on international context Global convergence perspective International diversity perspective Global convergence is driven by the ease, It is important to recognize in which low cost and frequency of international respects countries remain different communication, transport and travel. (languages, political systems, legal Growing similarity between countries systems, fiscal regimes, educational offers opportunities for leveraging systems and technological resources and sharing activities across infrastructure). borders. International diversity and political Suppliers, buyers and competitors can operate as if there are no borders. obstacles will limit the extent to which nations can become fully integrated. Demands of standardization, centralization and coordination require a global firm with International diversity creates a strong centre responsible for global opportunities for different strategy. innovations. The University of Sydney Page 39  Perspectives on international context The University of Sydney Page 40  Video: The Great Fracturing 1. What is the ‘Great Fracturing’ and what developments have put it in motion? 2. What are ‘Connector Economies’ and what are examples? The University of Sydney Page 41  Discuss: What comes next? Where do you think globalization will be in ten years time? The University of Sydney Page 42 Questions? The University of Sydney Page 43