Global Strategies and the Multinational Corporation ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Learning Objectives By the time you have completed this topic you will be able to: be aware of the impact of internationalization on industry structure and competition be able to analyze the implications of a firm’s national environment for its competitive advantage be able to formulate strategies for exploiting overseas business opportunities, including overseas market entry strategies and overseas production strategies appreciate how international strategies can be shaped to achieve an optimal balance between global integration and national differentiation Be able to design organizational structures and management systems appropriate to the pursuit of international strategies ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Patterns of Internalization ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Competitive Advantage in an International Context ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

National 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 abundant within that country The Philippines is relatively more efficient in the production of footwear, apparel, and assembled electronic products than in the production of chemicals and automobiles The 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 translates into competitive advantage ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Porter’s National Diamond Framework ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Applying the Framework: International Location of Production Three major factors: 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. ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Determining the Optimal Location of Value Chain Activities ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Alternative Modes of Overseas Market Entry ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Choosing the Modes of Overseas Market Entry: Key Strategic Questions Is the firm’s competitive advantage based on firm-specific or country-specific resources? Is the product tradable and what are the barriers to trade? Does the firm possess the full range of resources and capabilities needed to establish a competitive advantage in the overseas market? Can the firm directly appropriate the returns to its resources? What transaction costs are involved? ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

International Alliances and Joint Ventures Strategic alliances are collaborative arrangements between firms International alliances are strategic alliances involving partners from different countries International joint ventures are where partners from different countries form a new, jointly-owned company The main motivation for international alliances and joint ventures is the desire by multinational companies to access the market knowledge and distribution capabilities of local companies and the desire of the local partner to access the technology, brands and product development of the multinational. ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

The Benefits of Global Strategy Cost benefits of scale and replication Accessing global scale economies in purchasing, manufacturing, product development, marketing Replicating knowledge Serving global customers Multinational companies may prefer suppliers that can serve their global needs multiple locations Arbitrage benefits The international firm can access better or cheaper natural, human, and technological resources ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

The Benefits of Global Strategy Learning benefits Assessing and integrating knowledge from multiple locations Competing strategically Exploiting global strength to win local wars ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

The Benefits of Global Strategy ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

The Benefits of Global Integration Versus National Differentiation ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

The Development of the Multinational Corporation: Alternative Parent-Subsidiaries Relations Note: The density of shading indicates the concentration of decision making ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

The Transnational Corporation ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com