FOUNDATIONS OF STRATEGY CHAPTER 8 GLOBAL STRATEGIES & MULTINATIONAL CORPORATIONS Team 5 Micah Decuire, Kendra Kimberlin, Dylan Blase, Skylar Bogle and Daniel Uribe

Introduction and Objectives August 2011, started with many international stock exchange market such as the London FTSE, Dow Jones, and Germany DAX experiencing declining rates. The main cause; Spain and Italy. Since countries rely on each for import/exports, various markets can be suffer the consequences when one struggles. Internationalisation Internationalisation is the most important and persuasive force that has reshaped the competitive environment in the past half-century, and has been an expanding

Case Study: IKEA IKEA is one of the world’s largest furniture manufacturer and retailers Founder, Ingvar Kamprad, started selling various items until he decided to specialize in furniture. Later Kamprad moved production away from Sweden to Poland

Case Study: IKEA Patterns of Internationalisation Challenges entering the United States From here IKEA realized the need to change and adapt their products and management to better the area they were operating in.

Patterns of Internationalisation Occurs with manly with Trade and Direct Investment Sheltered Industries Trading Industries Multidomestic Industries Global Industries

Analysing competitive advantage in an international Context Changes in competitive positions of companies has created shifts in the growth of international competition in the last 20 years. 1989 US Steel was the world's biggest steel company, ArcelorMittal became the new global giant in 2009. 1989 IBM, Compaq and Apple were the world market leaders in PCs 2009 Hewlett-Packard and Acer were the new brand leaders

Competitive advantage in an international context The Industry Environment Key Success Factors Firms Resources and Capabilities Financial resources Physical resources Technology Reputation Functional Capabilities General Management Capabilities Competitive Advantage The National Environment National resources and capabilities (raw materials; national culture; human resources; transportation; communication; and legal infrastructure) Domestic market conditions Government policies Exchange rates Related and supporting industries

National influences on competitiveness: comparative advantage Comparative Advantage Theory: A country has a comparative advantage in those products that make intensive use of those resources available in abundance within that country. Abundance In Bangladesh - unskilled labour US- Technological resources: trained scientist and engineers, research facilities and universities Comparative Advantage Bangladesh- products that make intensive use of unskilled labour; clothing, handicrafts, leather goods and assembly of consumer electronic products. US- technology-intensive products; microprocessors, computer software, pharmaceuticals, medical diagnostic equipment and management consulting services.

Comparative Advantage cont. Relative efficiencies of producing different products. Trade theory: initial Natural resource endowments Labour supply Capital stock Trade theory: present Central role of knowledge (technology, human skills and management capability) Resources needed to commercialise knowledge (capital markets, communications facilities, and a legal system)

Porter’s national diamond Examined the dynamics through which particular industries within a country develop the resources and capabilities that confer international competitive advantage. Identifies four key factors which determine a country’s competitive advantage within a particular sector.

Key Factors Factor Conditions Highly specialised resources with many ‘home-grown’ rather than ‘endowed’ Related and Supporting Industries Clusters of industries Demand Conditions In the domestic market provide primary driver of innovation and quality improvement Strategy, Structure, and Rivalry Role of intense domestic competition in driving innovation, efficiency and the upgrading of competitive advantage.

Consistency between strategy and national conditions Establishing competitive advantage in global industries requires congruence between business strategy and the pattern of the country’s comparative advantage.

Limitation of the diamond model First Perspective: Rugman and Dunning omitting key factors. Needs to be expanded and amended. Rugman and D’Cruz propose ‘double diamond’ framework. Second Perspective: Waverman is so general it lacks value. Trying to explain all aspects of trade and competition the model ends up explaining nothing because it is insufficiently precise to generate testable predictions.

Applying the Framework: International Location of Production How national resource conditions influence international strategies: Where to locate production activities. How to enter a foreign market.

Where to Locate Production National resource availability Firm specific competitive advantages Tradability Political Considerations

Location of the Value Chain Production of most goods and services comprises a vertical chain of activities where the input requirements of each stage vary considerably. Different countries offer advantages at different stages of the value chain Resource availability and cost best match each stage Efficiency

How Should a Firm Enter Foreign Markets? Enter in pursuit of profitability Profitability depends on: Attractiveness of that market Competitive advantage within the market

Five Key Factors Relevant to Market Entry Competitive Advantage Tradability of Product & Barriers of Trade Range of Resources and Capabilities Directly Appropriating Returns on Resources Transaction Costs

Benefits of a global strategy Cost benefits of scale of economies Serving global customers Arbitrage benefits Learning benefits Competing strategically

National Differentiation

Global Integration vs National Differentiation Globalized Certificates of deposit IT Manufacturing Research and Development Purchasing Nationalized Current accounts Mortgage lending Sales Marketing Human research development Customer service

STRATEGY & ORGANIZATION WITHIN THE MULTINATIONAL CORPORATION Multinational Companies and the stages of history European multinational Post World War II Japanese Challenge Application to Wells Fargo…

RECONFIGURING THE MULTINATIONAL CORPORATIONS: THE TRANSNATIONAL CORPORATION Organization Structure Localization and Global integration R&D for New Product development

WELLS FARGO INTERNATIONAL LOCATIONS https://www.wellsfargo.com/com/international/locations/global-financial-institutions/

CLOSING CASE: SHARP’S PRODUCTION OF LCD’S LCD is the abbreviation for liquid crystal displays that was an up and coming technology. Sharp was the involved in the development of this technology in the sixties, but because of the cost was unfeasible at that time the technology was stalled. In the early 2000’s LCD’s took over the electronic world. However because of the competition the company decided to keep production close in Japan to maintain the intellectual property. Beyond the Case Throughout time there was a need to grow past it’s Japanese roots and thus Sharp had to internationalize. Therefore the company expanded to other locations , but as a result they were poorly prepared and suffered losses. Still the company endures and continues to pursue international ties.

CHAPTER 8 SUMMARY This chapter boiled down to the basics is essentially going over ways to make the process of internationalization easier to manage and focus on the small changes that will be needed to make the large culture of the company stay intact. There are so many factors that have to be accounted for in this process: patterns of internationalization, analysis of competitive advantages, formulation of strategies for basic business practices, as well as the strategies for the cultural aspects to make sure that everyone is one the same page.