DEFINING THE GLOBAL FIRM Chapter 3 Lecture 1

From Local to Global u u Domestic – –Local firms F F Individual F F Organizational u u International u u Multinational u u Partially to almost or fully global

Global Business is Important to Economic Development About 1/3 of world GDP is generated by business activities. Growth also is generated by business activities.

Characteristics of the Global Enterprise 1. 1.DRAWS RESOURCES FROM A GLOBAL POOL capital, labor, materials 2. 2.VIEWS THE WORLD AS ITS HOME 3. 3.ESTABLISHES A WORLDWIDE PRESENCE IN ONE OR MORE BUSINESSES but may go global by chance or design 4. 4.PURSUES A GLOBAL BUSINESS STRATEGY 5. 5.TRANSCENDS EXTERNAL AND INTERNAL BOUNDARIES

Let’s Look at Some Global Firms

Web Links to Explore These u u Coca-Cola u u Benetton u u Doc Martens

Global Enterprise Characteristic 1 – –DRAWS RESOURCES FROM A GLOBAL POOL F F capital, labor, materials

Global Enterprise Characteristic 2 VIEWS THE WORLD AS HOME – –Reduces existing links F F Moves its headquarters for all or some functions, e.g., Boeing, Alcatel to be “stateless” F F Creates a perception that it is not place bound, e.g., a name that has no meaning or an ad campaign that makes it more “local” F F Goes virtual so it has no fixed “place” – –Undertakes activities that make it a world citizen, e.g., Royal Dutch Shell

Global Enterprise Characteristic 3 – –ESTABLISHES A WORLDWIDE PRESENCE IN ONE OR MORE BUSINESSES F F but may go global by chance or design

Global Enterprise Characteristic 4 – –PURSUES A GLOBAL STRATEGY via an INTEGRATIVE APPROACH

Global Enterprise Characteristic 5 – –TRANSCENDS EXTERNAL AND INTERNAL BOUNDARIES F F VERTICAL/HORIZONTAL – –Vertical—customers, suppliers – –Horizontal—competitors F F TANGIBLE/INTANGIBLE – –Tangible—something we can measure – –Intangible—how people think or perceive

Five Levels of Strategy u u Enterprise Strategy—why do we exist as an organization? u u Corporate Strategy—what businesses should we be in now and in the future? u u Business Strategy—what is the source of our advantage? – –Dependent on existing competencies – –And on the nature of the industry in deciding – –How shall we position ourselves in the industries and businesses where we choose to operate? u u Operational Strategy—how shall we coordinate among PPS to meet enterprise, corporate, and business level strategies? u u Individual Strategy—what must each individual do daily at work to meet organizational goals consistent with other levels of strategy?

Enterprise Strategy u u usually is articulated by top management u u often is vague or abstract; can be described as vision, mission, values, etc. u u varies from country to country and from organization to organization within the same country u u can change over time, e.g., – –Boeing 1990 Mission: to be the number one aerospace company in the world and among the premier industrial concerns of quality, profitability, and growth – –Boeing Vision 2016: people working together as one global company for aerospace leadership u u informs (or should inform) all other strategy levels

Compare These Statements of Enterprise Strategy u u The objective of the enterprise is to make money and to have fun doing so. WL Gore and Associates u u Our goal is to provide superior returns to our shareholders. Profitability is critical to achieving superior returns, building our capital, and attracting and keeping our best people. Goldman Sachs u u It is our mission to improve the lives of customers and communities where we all live, work and play. Honda

Corporate Strategy Defines What’s in the Corporate Portfolio: Businesses to be in Now and Into the Future u u Corporate strategy is reflected by portfolio decisions – –Expansion, bottled water for Pepsi – –Contraction or exchange, sell off a unit, e.g., Corus sold its aluminum holdings – –Exchange, Boeing exchanges for Internet services. u u Corporate strategy is a view of the overall corporate portfolio of businesses

Business Strategies are (Almost Always) Industry Specific and Answer Two Questions: u u What are sources of distinctive advantage? – –This can be based on many attributes or a combination of F F physical, human or capital advantages F F financial, physical, legal, human, organizational, information, or relational – –Usually concentrate on 3–5 core competencies F F Examples are price advantage, product advantage, innovation, quality, ease of access u u How shall we position in the industry? – –Competition on a head-to-head basis – –Collaboration – –Coopetition u u May be articulated for the business or for a single subunit, e.g., commercial airlines

Operational Strategy Decisions u u which people, processes, and structures are needed to satisfy enterprise, corporate, and business strategies

Decisions About Enterprise, Corporate, Business and Operational Strategies Define u u individual objectives, job assignments, employee activities u u And they are interconnected with organizational culture, efficiency, and other activities u u So we return to this point: Organizations are interconnected internally, so action begins with enterprise strategy: why do we exist as an organization?

Ford’s Global Strategy

Video: Making Globalization Succeed u u be looking for vision/statement of values u u and how these values are embedded in people, processes, and structures for Levi, Motorola, and Sony

Argus Computers--India u u As you watch this, be looking for these points: what is the founder’s purpose? how are people developed? how is the organization structured?