BA 510 International Management - School of Business Administration

Report
BA 510 International Management
Doha 2011
Class 4
TODAY
Globalization Drivers
 Globalization vs. Localization
 Global vs. Multi-domestic Strategies
 International Strategy: Value Chain Perspective
 Canada Solar Case Study – Strategic Framing
 Finalize 5 minute pitches
 Make 5 minute pitches

GLOBALIZATION DRIVERS
Market Drivers
 Cost Drivers
 Government Drivers
 Competitive Drivers

Low
High
Multidomestic
Global
GLOBALIZATION DRIVERS
Aircraft
Computers
Automobiles
High
Strength
of Market
Drivers
Soft Drinks
Toothpaste
Retail Banking
Book Publishing
Baked Goods
Low
Multi-domestic
Global
High
GLOBALIZATION DRIVERS
Pharmaceuticals
Aircraft
Computers
High
Strength
of Cost
Drivers
Automobiles
Toothpaste
Retail Banking
Baked Goods
Soft Drinks
Low
Multi-domestic
Global
High
GLOBALIZATION VS. LOCALIZATION


Globalization:
 Operating with relative constancy in a number of
markets -- as if the entire world (or major regions of it)
were a single entity; selling the same things in the
same way everywhere (Levitt 1983)
 Examples?
Localization:
 Operating in a number of countries, adjusting products
and practices in each -- at a high relative cost, with a
committed operating presence in the markets of other
nations.
 Examples?
GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat)
 Most
of modern global strategy focuses on
minimizing differences
 But, correctly choosing how much to adapt a
business model is important to extract full value
from a business
 Employ a strategy of differences (arbitrage) and
exploitation of scale economies
GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat)
 Strategy
of differences: arbitrage
 Cultural
Arbitrage: Exploiting of culture to gain
advantage. Ex: food, clothing, US fast-food chains
 Administrative Arbitrage: Exploiting legal, institutional
and political differences from country to country. (ex: tax
differentials)
GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat)
 Strategy
of differences: arbitrage (cont)
 Geographic
Arbitrage: Not as important now due
to reductions in transportation costs, but can be
used in areas such as telecommunications (local
vs. long-distance) and distribution networks
 Economic Arbitrage Includes exploitation of
differences in costs of labor and capital,
variations in knowledge or availability of
complementary products, technologies or
infrastructure
GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat)
 Globalization
 focus
allows for:
on market similarities
 upward spiraling of market share, leading to greater
economies of scale
 lower costs through greater economies of scale
 lower prices for consumers
GLOBALIZATION VS. LOCALIZATION

Managing Differences (Ghemawat)
 Localization
 winning
allows for:
specific buyers and maximizing sales
 not over-designing products for some countries and
under-designing them for others
 not undermining some company networks which already
exist
 not dampening entrepreneurial spirit
GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Global Strategies
•System-wide approach to competing worldwide
• Mutually interdependent subsidiaries
• Centralized control and reporting of activities
• Facilitates cross-subsidization policies across
markets
Slide 812
GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Global Strategies
 Standard products
 Global economies of scale in key
components and activities
 Leverage technology across many markets
 Global coordination of marketing and sales
system-wide
 Cross-subsidization policies to respond to
competitive moves by other global strategy
firms
Slide 813
GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Multi-Domestic Strategies
•Competitive advantage is built in each separate national or
regional market.
• Markets and subunits are treated independently from one
another.
• Decentralized controls of activities, reporting back to
headquarters.
Slide 814
GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Multi-Domestic Strategies
 Customization or frequent adaptation of
products for each separate market
 Few systemwide opportunities for economies
of scale
 Value-adding activities performed and
duplicated in each market
 Coordination of marketing and sales within
each market
 Quality and image across markets are
important sources of competitive advantage
Slide 815
GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Benefits of Global Strategies
 Market growth and expansion opportunities
 Recovery of R&D and investment costs
 Creation of a distinct image
 Accelerated learning and transfer of new
skills
Slide 816
GLOBAL V. MULTI-DOMESTIC
STRATEGIES
Costs of Global Strategies
 Strategic Leverage
•
•

(In)Flexibility
•
•

Sustained investment required
Preserving and extending image
High interdependence of subsidiaries (and
businesses)
Change or development affecting all markets
Cooperation
•
•
Compromise
Accountability
Slide 817
Pressures for Global Efficiency
GLOBAL V. MULTI-DOMESTIC
STRATEGIES
High
Low
Low
High
Pressures for Local Responsiveness
INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Infrastructure
Technology Development
Procurement
Human Resource Management
Inbound
Outbound
Operations
Logistics
Logistics
Marketing
Profit
Margin
Service
INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
Profit
Margin
Service
INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management
Inbound
Outbound
Operations
Logistics
Logistics
Upstream
Marketing
Profit
Margin
Service
INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Headquarters
Infrastructure
Technology Development
Procurement
Human Resource Management
Inbound
Outbound
Operations
Logistics
Logistics
Upstream
Profit
Margin
Marketing
Service
Downstream
INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Infrastructure
Technology Development
Procurement
Human Resource Management
Inbound
Outbound
Operations
Logistics
Logistics
Advertising
Pricing
Marketing
Distrib.
Profit
Margin
Service
Packaging
INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
 Geographic
location of value chain
activities
 Concentrated/centralized
vs.
dispersed/decentralized
 Decision on modes of entry into new
country markets (Class 5)
INTERNATIONAL STRATEGY:
VALUE CHAIN PERSPECTIVE
Cross-border linkages between dispersed
value-creating units
 Coordination = Flows of:

$
 Product
(finished and intermediate)
 Technology
 People
 Information (market data, strategic direction,
etc.)

Highly coordinated vs. only money flows
CASE STUDY: CANADA SOLAR




What are the key market and cost drivers in this
industry?
What arbitrage opportunities, if any, exist in this industry
and, specifically, for Canada Solar?
To what extent are there tensions between globalization
and localization for Canada Solar as it consider
international expansion of its manufacturing?
Create a “Pressures” matrix that characterizes where
Canada Solar and your target company reside.
5 MINUTE PITCH

Preparation
 Cluster
Assessment + “Fit-1” (Solar PV Mfg and
Qatar)
 1.5 page outline plus presentation
 No longer than 5 minutes
 Three “C’s”: Concise, Clear, Contextual

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